Bank Holding my Flood Insurance Check

[Kenneth N.]

I'm in the Houston (The Woodlands) area and one of my rentals took on 2 feet of water during Harvey.  Although not required by my lender and not part of my escrow, I purchased flood insurance on my own.  I received an advance check from my flood insurance company for $30,000 made payable to me and my lender.  My lender is a small regional bank (Spirit of Texas Bank) and instead of endorsing the check and allowing me to deposit into my own account, has set up a reserve account for the funds.  Funds are only dispersed to me after I provide paid contractor receipts, canceled checks and allow for a bank inspection of the property.  

I understand the bank needs to protect their side of the investment, but this was not required supplemental policy that the lender had no idea I even had.  Does the bank have the right to control my claim money like this?  

[Drew Shirley]

You'd have to look at the terms of your policy and your loan documents, or better yet, ask the bank what is their authority for holding the funds. If flood insurance was not required and the lender had no part in the transaction, I'm not sure how they are claiming the right to withhold.