As residents and businesses in the Southeast begin to dig out from the aftermath of Hurricane Matthew, homeowners with a mortgage could face an additional headache when they file insurance claims, as they’ll often have to get their mortgage holder’s OK before they cash that check to rebuild their home.

Welcome to the hassle known as the “mortgagee clause.” While getting an initial insurance claim check for personal property losses during a disaster is usually a straightforward affair, since the mortgage holder has no financial interest in your personal property such as a car, furniture or clothing, when it comes to the actual four walls and the roof of your home, it’s a different story. And it can be a nightmare.

The mortgagee clause requires insurance companies to write some checks out to not just the homeowner, but the bank holding the mortgage — which could make it difficult for policyholders to access the cash needed to fix their house if it sustains damage in a hurricane.

That’s just what happened to Tony Kono, a public-relations executive, in the aftermath of the flooding of his Jersey Shore dream house in Brick, N.J., from Hurricane Sandy in October 2012.

“We were living with no power and no heat for 11 days,” he said.

When the electrical power returned, he filed a claim with his insurance company, and quickly got $7,500 to pay contractors who made emergency repairs by shoring up his electrical and heating systems and hauling away storm debris. A few months later, when he started receiving the balance of his $85,000 insurance-claim payment, his wife took a claims check from his insurance company to their local TD Bank, so they could afford to begin the actual repairs on the first floor of their house. But the check had not only his name on it, but also the name of his mortgage holder, Weichert Financial Services.

That’s when, in his words, “things got ugly.”

“My wife called to tell me that TD Bank would not accept the check as it had to be endorsed by a Weichert Financial representative,” he said. Moreover, walking into a local Weichert Financial branch office in Morris Plains, N.J., to have the $7,500 check endorsed wouldn’t work either.

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“I had to send it to the Lake Zurich, Illinois, mailing address where our mortgage correspondence comes from,” he recounted. When no endorsed check was returned, he called and found out that, yes, the bank had received his check, but wouldn’t return it to him until they got an estimate for the repairs, and even then wouldn’t return more than one-third of the remaining amount to start. A Weichert Financial representative did not respond to emailed requests for comment.

Kono, along with many other Hurricane Sandy victims, had been tripped up by the mortgagee clause, says Mark Romano, claims project director at the Consumer Federation of America, a consumer watchdog group based in Washington, D.C. With a “mortgagee clause,” the bank that holds your mortgage can take over control of the insurance cash by requiring its representatives review and sign any insurance company claim checks, or even put the rest of the money in an escrow account until the repairs are finished, he says. “This is a common practice,” Romano says. “The threshold as to when and why an insurer will put a mortgage holder on a claim check varies from company to company,” he adds. “(It’s) a big hassle.”

Kono says he was completely taken by surprise, since he assumed he would have access to his insurance cash as needed. “Not having any idea this would happen in a crisis was my biggest frustration,” says Kono. “It was a bureaucratic nightmare.”

The Consumer Federation of America, a Washington D.C.-based consumer advocacy group expects about 100,000 homeowners to file damage claims for as much as $7.5 billion from Hurricane Matthew, though well short of the record claims made from the most severe storms such as Hurricane Katrina or Hurricane Andrew, where damage claims were more than $100 billion.

CoreLogic, an Irvine, Calif.-based real estate research firm estimates damage from Matthew , which made landfall as a Category 3 storm, to be as much as $4.5 billion for residential properties, with 1.12 million individual homes impacted, with 90% of the damage coming from wind and 10% coming from storm surges.

Also See: How fewer homeowners in the Southeast have insurance coverage despite hurricane risk.

For Julie Reynolds, a homeowner in Southern California whose Westlake Village house was flooded when a toilet overflowed, the headache was even worse. Even though she incurred more than $42,000 in damages from the flood, her insurance company never sent her any money directly after an initial $8,000 emergency payment. Instead, she said, the insurance company sent the checks straight to the bank, where they were held in escrow. “It was like pulling teeth to get my money,” she said.

She was able to cover the initial repairs to her house with her savings and later get reimbursed from her mortgage bank, but she worries what might have happened had she not had the cash in her bank to pay the costs up front. “You could get wiped out financially before you got a dime from the bank,” she said. “How do they expect you to pay the mortgage when you’re pulling money from your own pocket for the repairs and then hoping to get reimbursed?”

Robert Hunter, a former state insurance commissioner who’s typically a sharp critic of the insurance industry, says the clauses in the homeowners insurance policies are required by the banks to protect their financial interest in the property..

“It’s news whenever I say something’s not the insurance industry’s fault, but that’s what’s going on here,” he said. While he understands the underlying motives for the banks requiring co-signatures on insurance checks, he says the homeowners are often left hanging, wondering if they’ll ever get their money.

“You don’t want the homeowner to take the money that should go to the repair of the house to the craps tables in Vegas, but what’s happening now is ridiculous,” he said. Hunter, who also works with the CFA, said he had to loan several thousand dollars to his son when he incurred damage to his home. “It took my son six months before the bank gave him his money.”

Robert Passmore, assistant vice president of personal lines policy with the Property Casualty Insurers Association of America, a trade group representing insurance companies, says his members need to follow the bank’s wishes by adding the clauses to the homeowners policies, because they can be on the hook if the homeowner doesn’t follow through on the repairs, paying twice for the same repair. “The lien holder can come back to us and say, ‘pay us again.’”

Passmore also says that it has been his experience that there isn’t any standard set of guidelines that require cosigning on insurance claims checks or how and when to release funds and how much at a time. “Smaller banks sometimes can be really good and quick, but there are also some big banks that can be just horrible,” he said. “Some will want to see estimates, some want to see pictures (of the repairs), and some will send an inspector out,” he said.

Pete Mills, senior vice president of residential policy at the Mortgage Bankers Association, a trade group, said that most banks and mortgage servicing companies require the funds to be escrowed when the claims exceed $20,000 to $25,000. Moreover, banks want some control over the disbursed funds, if only to protect the consumer. “Contractors are very good at talking you out of your money,” he said.

Mills said that many large mortgage providers did send servicing representatives to affected areas like New Jersey after Hurricane Sandy to help speed processing and alleviate the “cosigning” headache. “Every company makes its own call, but when you have concentrated losses in one area, the services will send somebody in,” he said. “It won’t take them very long to make a damage assessment and make a decision on sending people” to the impacted location.”

In his case, Tony Kono said that despite Weichert Financial being one of the biggest mortgage companies in New Jersey, he said there was no servicing representative on-site to help homeowners with the cosigning issue. Moreover, the Illinois-based staff for the mortgage provider were unaware of the level of damage in New Jersey, Kono said.

The CFA’s Hunter suggests if claims are taking too long to process, homeowners should get in touch with their insurance commissioner, or as a last resort, file a lawsuit under a state’s Unfair Claims Settlement Practices Act, as many states have them.

Still, if there’s one place Mills, Hunter and Passmore agree, it’s that the federal government needs to step in and help draft some better guidelines.

To that end, Fannie Mae FNMA, +1.25% recently released guidelines stating that loans that are current or less than 31 days delinquent can receive an initial disbursement up to $40,000 or 10% of the unpaid principal balance (UBP) in insurance claim losses, whichever is more.

The guidelines also apply to Freddie Mac FMCC, +0.52% -backed loans, according to the Federal Housing Finance Agency. The rest must be disbursed based on “periodic inspections of the repair work,” according to the guideline. But if the loan is more than 31 days past due, only 25% of the insurance loss proceeds can be disbursed at once, and no more than $10,000. The Fannie Mae and Freddie Mac guidelines do say that if insurance funds are placed in escrow, the homeowner should at least earn interest on the proceeds.

That’s small comfort to Kono, who among other things had to pay $450 a month in heating bills for six months because the storm ruined all the insulation in his house and he had no money to replace it until the remaining insurance checks were cosigned and the repair plans approved. As a result, his repairs weren’t finished until spring of 2013, nearly eight months after the storm.

In a letter he sent to his bank’s president describing the situation in 2012, Kono considered himself fortunate, despite the hassles. “My wife and I are lucky, we (had) the ability to weather this financial storm for the medium term, but my neighbors, who are not in the same position financially that we are and were more severely impacted as a result of Sandy, needed the money owed to them simply to pay their mortgages, car payments and employees in an attempt to move on with their lives,” he said.

(This story has been updated to reflect Hurricane Matthew’s expected landfall in Florida.)