Legal Question in Real Estate Law in California

Re: mortgage

As far as I know, there are no laws or public policies directly affecting the right of a creditor to offset and withhold. It's probably a matter of contract. I believe if the insurance is a kind that the owner is required to carry under the terms of the loan, such as fire insurance, it is common for the lender to be named as loss payee in the insurance. Further, the loan terms probably give the lender a security interest in the insurance proceeds, since it needs to be assured that its collateral is maintained in good repair, and insurance proceeds don't necessarily have to be spent to repair the insured casualty.

All this is to say that the lender probably has the right to withhold making the insurance proceeds available to you, but that would be a result of your contracts with the lender and perhaps the insurer, not the result of some law you can go look up in a code somewhere.