How to write an appeal to have HUD CDBG-DR grants reimburse NFIP insurance funds used to payoff home mortgage.
How to write an appeal for CDBG-DR reimbursement to cover NFIP insurance funds used by mortgage lenders to payoff mortgage after a disaster left your home substantially damaged. Mortgage lenders will protect their interest with your insurance payment.

By Murray Wennerlund published 5-26-2022 updated 11-3-2022

This letter is specific to the state of Louisiana Office of Community Development - Disaster Recovery Unit middle management.

Enter your information where you find brackets "[ enter data ]."

[Homeowners full name ]
[Program Account or FEMA Claim or Insurance Claim number]
[Physical Home Address]
[YOUR STATE GRANTEE AGENCY]:[Enter Managers in the appeals process]

I respectfully request an Exception Board Review regarding NFIP insurance funds used by our mortgage lender [LENDER NAME] to pay our mortgage in full. Our insurance company [INSURANCE COMPANY NAME] sent us our NFIP funds made out to [NAMES ON INSURANCE CHECK]. We were instructed to bring the check to any [LENDER NAME] office. [LENDER NAME] took the check we had signed and without discussion applied the full amount to our mortgage. There was no offer of an escrow account or depositing the funds in a joint account for reconstruction. We were told by phone that [LENDER NAME] found no value in the home. The insurance funds were used by [LENDER NAME] to pay off our mortgage and not offered to us for reconstruction. At no time did we have legal control over the NFIP insurance money once we signed the check and handed it to [LENDER NAME].

Previous attempts to have [LENDER NAME] provide us with a letter stating it was a "Forced Mortgage Payoff" have failed. [LENDER NAME] policy is not to provide such a letter. [LENDER NAME] did provide a letter indicating that they were in control of the NFIP insurance money and applied the NFIP money toward our mortgage in full subsequently paying our mortgage to a zero balance.

[LENDER NAME] detailed their actions in the attached letter dated [DATE ON LETTER]:

"Our records indicate that on [MONTH, DAY, YEAR], your mortgage loan was paid in full using the insurance claim funds we received from [INSURANCE COMPANY NAME]. "

We ask that you adjust our Duplication of Benefits to reflect that our NFIP funds were used by our lender to pay our mortgage in full and should not apply as a DOB.

Referencing the most recent HUD Guidance dated June 12, 2019:

Docket No. FR-6169-N-O1
Section: IV.B.2. Availability of Resources Included in Total Assistance

"Funds are not available to an applicant if the applicant does not have legal control of the funds when they are received. For example, if a homeowner's mortgage requires insurance proceeds to be applied to reduce the unpaid mortgage principal, then the lender/mortgage holder (not the homeowner) has legal control over those funds. The homeowner is legally obligated to use insurance proceeds for the purpose of reducing the unpaid mortgage principal and does not have a choice in using them for any other purpose, such as to rehabilitate the house. Under these circumstances, insurance proceeds do not reduce CDBG-DR rehabilitation assistance eligibility."

Thank you for your consideration on this matter.



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