Loss Draft
By Justin Skipton, AIC, SPPA – President, National Association of Public Insurance Adjusters (NAPIA) and Partner at Skipton Claims Management
If you’ve suffered damage to your home or business and are in the middle of an insurance claim, you may have already received a check from your insurance company. But instead of being able to cash it, you realize it’s made out to both you and your mortgage lender.
This type of check is called a loss draft, and it’s one of the most misunderstood (and often frustrating) parts of the claims process. Here’s what it means—and generally how to navigate it.
What Is a Loss Draft?
A loss draft is a check issued after an insurance claim that is jointly payable to the property owner and their mortgage company. Because the lender still has a financial interest in the property, they want to ensure the funds are used for repairs—not diverted elsewhere.
How the Process Works
- You file a claim after damage occurs.
- The insurance company issues an undisputed payment on the claim and issues a check made out to both you and your lender.
- You sign the check and send it to your mortgage company for their endorsement.
- The lender may and likely will request additional documentation like contractor estimates, insurance scopes, lien releases, etc.
- Funds may be released in stages, often requiring inspections at each milestone. Typically 1/4s or 1/3s
- Final payment is released once the mortgage company confirms the work is complete or nearly complete.
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Why Lenders Require This
That said, it’s my personal opinion that the insurance carrier should not have the right to withhold funds beyond their financial interest in the property. To do so puts you, the policyholder, in a difficult position—especially when trying to complete timely and necessary repairs. I encourage all consumers to push for the full release of funds up to the level of the mortgage company’s financial interest, depending on your current loan balance and the lender’s draw schedule.
How Skipton Can Help
At Skipton & Associates, our priority is making sure you are fully and fairly compensated by your insurance carrier so you have the funds necessary to complete repairs the right way. We don’t just submit claims — we advocate for you every step of the way.
We also understand the added layer of dealing with mortgage lenders. That’s why we work with you and your lender to help:
- Ensure claim funds are released in alignment with your loan balance and lender draw schedule
- Navigate the required loss draft paperwork and compliance process
- Coordinate any inspections or documentation needed to keep funds moving
- Push for timely disbursements so your repairs aren’t delayed
This process can feel slow and frustrating — especially when you’re trying to move forward after a loss. Our team is here to remove friction, simplify the steps, and help you get back to normal faster.
Residential Homeowners
Residential insurance policies not only require the insured to adhere to specific duties post-loss, but they also establish strict timelines that, if not met, could jeopardize the full recovery of a claim.
Major Mortgage Company Loss Draft Contacts
To save time, here are direct phone numbers to the loss draft departments of common mortgage companies:
- Caliber Home Loans – 866.940.2335
- Wells Fargo – 888.818.9147
- Chase – 866.742.1461
- BBVA – 844.412.9720
- Select Portfolio Servicing – 800.641.2754
- Flagstar Bank – 833.806.2525
- Shellpoint Mortgage – 877.826.4433
- United Wholesale Mortgage – 800.219.5349
- USAA – 855.358.9208
- Towne Mortgage – 800.979.1993
- PennyMac – 866.314.0498
If you’re dealing with an insurance claim and facing the loss draft process, we’re here to help. Whether it’s your home or your business, you don’t have to face the system alone.
8710 E Vista Bonita Dr, Scottsdale, AZ 85255
(602) 957-8800
www.skiptoninc.com
“SIGNIFICANTLY MORE”
“I worked with Dave in both Arizona and California on several claims. I found David to be fully up to date on the current legislation regarding fire losses, tenant responsibility, and insurance policies and practices. In every instance his work resulted in significantly more reimbursement from the insurance carrier, which allowed us to fully restore the damaged property, including lost income (rent) during the period of the loss and repairs. David will be straightforward, and happy to answer any questions you and your daughter may have, even if he does not end up assisting you with the claim.”