Chris and Analia DeHayes lost their Ruskin, Florida home to flooding during Hurricane Helene two years ago. What followed was a nightmare that had nothing to do with the storm, but everything to do with their bank.<\/p>\n
The couple had flood insurance through FEMA\u2019s National Flood Insurance Program, which caps payouts at $250,000 for residential structures (1). Tampa Bay 28 reports the couple received nearly that amount, but because they had a mortgage, their insurer made the check out to both them and their lender, Chase Bank (2).<\/p>\n
Must Read <\/p>\n
This standard industry practice (3) gave Chase significant control over the money, and though the bank released $141,000 to the couple, it withheld nearly $100,000 for more than a year.<\/p>\n
In the meantime, with construction on the damaged home underway and costs elevated because the home had to be raised under FEMA\u2019s 50% rule, the couple had to find a way to keep the project moving.<\/p>\n
\u201cChase has made this an absolute nightmare,\u201d Chris DeHayes told Tampa Bay 28 (2).<\/p>\n
The 401(k) drain and the tax bomb that followed <\/p>\n
With the insurance funds locked up and construction bills mounting, the couple did what many Americans in financial crisis do: they tapped into their retirement savings.<\/p>\n
\u201cWe\u2019ve had to even cash in part of our 401(k) to keep the building process going,\u201d Chris told Tampa Bay 28. \u201cWe have taken almost a quarter million out of that fund.\u201d<\/p>\n
Unfortunately, their decision carries consequences that will outlast the rebuild. Under IRS rules, 401(k) withdrawals are treated as ordinary income in the year they\u2019re taken (4).<\/p>\n
For a couple pulling out nearly $250,000 in a single tax year, that amount gets stacked on top of any other income and taxed at their marginal rate, potentially pushing a significant portion into the 35% federal bracket (5). And if either partner is under 59\u00bd years old, an additional 10% early withdrawal penalty also applies (4).<\/p>\n
Chris told Tampa Bay 28 he\u2019d been counting on receiving the Chase funds in time to reinvest them and neutralize the tax hit, but that didn\u2019t happen. Now, he\u2019s on the hook for tens of thousands of dollars in taxes on money he never wanted to spend in the first place.<\/p>\n
The couple said they were also blocked from accessing a Small Business Administration disaster loan they\u2019d been approved for, as the terms required full insurance payout to be received before rebuilding funds would be given. Chase\u2019s delay effectively blocked that lifeline, too.<\/p>\n
Story Continues <\/p>\n
Why banks can do this, and Florida offers little protection <\/p>\n
The mechanics behind the DeHayes\u2019 ordeal are built into standard mortgage agreements. When a home with a mortgage suffers significant damage, the insurance check is typically made out to both the homeowner and the lender. The lender then holds funds in a restricted escrow account and releases them in stages as repairs are verified through inspections (6).<\/p>\n
Chris and Analia DeHayes say Chase Bank repeatedly scheduled and then cancelled those required inspections over the course of a year. They also say the documentation demands were \u201crelentless,\u201d with more than 90 documents submitted in their effort to unlock the funds (2).<\/p>\n
Read More: Get rich from rising US property values with as little as $100 \u2014 and without the stress of angry tenants<\/a><\/p>\n Florida attorney David Murray, who handles insurance cases, told Tampa Bay 28 the state offers virtually no protection in this situation. \u201cFlorida, unfortunately, is way behind in the consumer protections that it needs to have in place,\u201d said Murray.<\/p>\n Many mortgage agreements give lenders vague or expansive authority over insurance payouts, sometimes even the power to decide whether a home is rebuilt at all, he added.<\/p>\n Plus, while the homeowner waits, the bank isn\u2019t sitting idle. \u201cThey\u2019re benefiting two ways,\u201d earning interest on the insurance funds they\u2019re holding, while simultaneously collecting interest on the original mortgage balance from the borrower, Murray explained (2).<\/p>\n The contrast with other states is notable. For example, California passed legislation in 2025 requiring lenders to pay at least 2% annual interest on insurance proceeds held in escrow (6).<\/p>\n How the FEMA 50% rule made everything more expensive <\/p>\n Compounding the financial pressure, the DeHayes\u2019 home had to be elevated as a condition of rebuilding.<\/p>\n Under FEMA\u2019s Substantial Improvement rule (7) \u2014 commonly known as the 50% rule \u2014 any structure in a designated flood hazard area where repair or renovation costs exceed 50% of the structure\u2019s pre-damage value must be brought into full compliance with current flood codes, including elevation requirements (8).<\/p>\n For many Florida homeowners, that means physically lifting the entire house \u2014 a process that costs around $150,000 for a small home and can reach upwards of $1 million for larger properties (9).<\/p>\n That additional cost is precisely what pushed Chris and Analia DeHayes deeper into their retirement accounts while they waited for Chase to release the funds. After Tampa Bay 28 contacted Chase, the company conducted a virtual inspection that same day. Shortly after, Chris and Analia DeHayes received a check for nearly $100,000.<\/p>\n The resolution was welcome, but the financial damage from nearly a year of delays had already been done.<\/p>\n What homeowners should know <\/p>\n For homeowners impacted by a natural disaster, be sure to contact your mortgage provider immediately upon receiving the check, submit all documentation via certified mail with tracking, and keep copies of everything.<\/p>\n If a lender\u2019s interest in the home is less than the claim amount, Tampa Bay 28 notes homeowners can ask their insurer to reissue the check, limiting the lender\u2019s cut to only what\u2019s still owed on the mortgage (2).<\/p>\n For guidance on working through the process, United Policyholders maintains a state-by-state recovery resource library for homeowners navigating insurance and lender disputes (10).<\/p>\n And if you\u2019re considering tapping into your 401(k) to bridge the gap, understand the full cost before you do so. The IRS\u2019s qualified disaster recovery distribution provision waives the 10% early withdrawal penalty on up to $22,000 for those in a federally declared disaster area. Any amount above that is subject to both income tax and the standard 10% penalty (11).<\/p>\n Income taxes still apply on the full amount, though they can be spread across three tax years rather than taken as a single-year hit (11).<\/p>\n You May Also Like <\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n Article Sources <\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines<\/a>.<\/p>\n North Carolina Department of Insurance (1)<\/a>; Tampa Bay 28 (2)<\/a>; AmeriSave (3)<\/a>; Internal Revenue Service (4)<\/a>, (5)<\/a>, (11)<\/a>; United Policyholders (6)<\/a>, (10)<\/a>; Federal Emergency Management Agency (7)<\/a>; Charlotte County Government (8)<\/a>; Marketplace (9).<\/a><\/p>\n This article originally appeared on Moneywise.com<\/a> under the title: Bank sat on $100K of Florida couple’s flood insurance for a year, forcing them to take $250K from their 401(k)<\/a><\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Chris and Analia DeHayes lost their Ruskin, Florida home to flooding during Hurricane Helene two years ago. 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