State says 10 banks hold back millions in Sandy aid

The New York State Department of Financial Services said on Tuesday that it had identified 10 banks that have been slowest to pay insurance claims to Hurricane Sandy victims, and told them to speed up the release of those funds to affected homeowners.

The department recently conducted a review of practices by banks and mortgage servicers to determine whether homeowners hit hard by Sandy — and allowed to forgo mortgage payments — are now being unfairly burdened by the requirement that they make up all past payments in immediate lump sum repayments.

The department is asking banks to allow more time for homeowners to make back payments, and checking to see if banks have delivered on their promise not to use late payments to start foreclosure proceedings or hurt homeowners’ credit ratings.

“The state has worked hard to cut red tape for homeowners affected by Superstorm Sandy so they can get the relief they need to rebuild and recover as quickly as possible,” Governor Cuomo said in a statement. “While we won’t be satisfied until every single victim gets every single dollar to which they’re entitled, some banks have continued to lag especially far behind the rest and it’s well past time for them to pick up the pace.”

An investigation by the Financial Services Department, which reviewed 33 of the nation’s largest banks and mortgage servicers, found that on average, the “bottom 10” banks — including Capitol One and OneWest — are holding back nearly half of the Sandy insurance claims they have received, well above the industry average of 17 percent. Additionally, those 10 banks are currently holding 1,109 checks for Sandy insurance claims totaling nearly $41 million.

The department said that one of the 10 banks, Selene Finance, is still withholding 71 percent of the Sandy insurance funds that it has received. No bank in the bottom 10, according to the department, is holding back less than 38 percent of those funds.