The reality is that a lender/servicer is in the driver’s seat when it comes to divvying up insurance proceeds. It comes with the power instilled by being a “loss payee” on the homeowner’s policy. Servicers are bound by the terms of the Pooling and Servicing Agreement (PSA). The PSA says the servicers must be sure that the mortgaged property is maintained. This is especially true when a loan is in default.
They know that a lot of people who have little or no equity, and are in default, might just try to find a way to take off with as much of the insurance proceeds as they can and leave behind a house with the mold infested sheet rock, floors and carpets. This is why they (a) want to see a contractor involved with the repairs and (b) dole out the money in dribbles and drabs to be sure all of it is going towards the repairs and not into the pocket of the borrowers.
In this case, Karry and her husband are doing the work themselves and using would have been a contractor’s profit as a contribution to the family budget. There is nothing wrong with the process except lenders and servicers hate it. And in some cases their dislikes are well founded. There has been more then one homeowner who has just painted over the mold leaving the other side of the sheet rock and the fiberglass a serious health risk and devaluation of the property value.
I would certainly consult with the Oklahoma insurance people for guidance. At the same time you are going to need to prove to Countrywide that you are qualified to do the work and that you are indeed doing the work properly. You will also need to allow them to inspect the progress of the work. I would also fully document the progress of the work with close up still photos. There can never be enough pictures. Hopefully you have before pictures. Put the pictures in chronological order with captions of exactly what is going on in each photo with the date and time. A camera generated date/time stamp is best. Send this to Countrywide along with your request(s) for a draw payment. Do a timeline beginning when the damage occurred and give intermediary dates of when each phase of the restoration will be completed. Base you draw payments on the timeline.
Start sending "Qualified Written Requests" to Countrywide explaining exactly what you expect them to do with the proceeds.
Hope this helps