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Mortgage Impairment

Have you given any thought to the administrative burden and expenses associated with managing the errors and omissions and hazard risks created by your real estate loan servicing operation?

With Mortgage Protection, we’ll get your team out of the business of tracking insurance and get them back to the business of making loans. This expanded version of traditional Mortgage Errors and Omissions / Mortgage Impairment insurance functions much like its LSI counterpart does for consumer loan portfolios, in that the lender must make a normal and reasonable effort to confirm that the real estate securing the mortgage is covered by borrower-purchased hazard insurance only at loan closing.

This simplifies mortgage loan servicing and reduces servicing costs, because it relieves the mortgage lender or servicer of the administrative burdens of tracking borrower hazard insurance to assure that it remains in force, and of having to schedule and purchase lender-placed insurance when necessary.  The lender’s interest in mortgaged property remains covered even if the lender intentionally takes no action in response to known lapses or cancellations of borrower insurance.

Coverage is provided for uninsured loss or damage to the mortgaged property, as is errors and omissions coverage for certain lender servicing responsibilities and duties related to the mortgage.

This coverage is underwritten by Certain Underwriters at Lloyds, London, and there are three coverage options typically offered. Coverage for errors and omissions in connection with your real estate loan servicing activities are the same for all Options.

Three coverage Options are typically offered for losses to your mortgage or owner interest resulting from physical loss or damage to property securing your real estate loans, as provided by Sections A1 (Physical Loss or Damage from Required Perils) and C (Physical Loss or Damage from Balance of Perils) of the Policy.  Coverages for errors and omissions in connection with your real estate loan servicing activities are the same for all Options.

Option MP 1 – “Checking”

  • Requires that you have a system or process in place to verify the hazard insurance you require of the mortgagor is in place:
    • At loan closing; and
    • at least annually thereafter.
  • Coverage for Sections A(1) and (C) losses under Option MP 1 is limited to 90 days from the earlier of :
    • The date you become aware of or have actual notice that required mortgagor hazard insurance is no longer in effect; or
    • when title to foreclosed property passes to you, the date you take title.
  • To protect your mortgage or owner interest in the property securing your loan, you must react before the 90 day coverage period ends to either:
    • Obtain evidence that required mortgagor hazard insurance has been reinstated or replaced; or
    • you must obtain coverage for the property yourself.

Option MP 2 – “Ex-checking”

  • Requires that you have a system or process in place to verify the hazard insurance you require of the mortgagor is in place only at loan closing.  You are not obligated to maintain any mortgagor hazard insurance follow-up system thereafter.
  • Coverage for Sections A(1) and (C) losses under Option MP 1 remains limited to 90 days from the earlier of :
    • The date you have actual notice that required mortgagor hazard insurance is no longer in effect; or
    • when title to foreclosed property passes to you, the date you take title.
  • As with Option MP 1, you must react before the 90 day coverage period ends to protect your mortgage or owner interest in the property securing your loan.

Option MP 3 – “Ex-checking” plus deletion of (c), (d), and (e) under Policy Conditions Applying to Sections A and C

  • Provides coverage on an “Ex-checking” basis, plus removes the Policy Conditions which limit coverage for losses under Sections A(1) and (C) to 90 days from the date you have actual notice that required mortgagor hazard insurance is no longer in effect.
  • Under Option MP 3, your mortgage interest in property remains protected provided you have a system or process in place to verify required mortgagor hazard insurance at loan closing, with no further mortgagor hazard insurance checking requirement thereafter, nor need to react within 90 days of the date you have actual notice that required mortgagor hazard insurance is not in force.
  • Under this Option, when title to foreclosed property passes to you, coverage for losses under both Sections A(1) and C remains limited to 90 days from the date you take title to such property.

 

Why you should consider Lenders Risk’s Lloyd’s Mortgage Protection Policy

  • You should give serious consideration to Option MP 3 if you are expending a significant amount of time, effort and expense tracking required mortgagor hazard insurance on properties securing your real estate loans, and find that your staff is processing scores of insurance documents, but force placing coverage on only a small number of properties.
  • Although Option MP 3 carries a higher premium cost, this Option allows you to simplify your loan servicing operation and cut costs by eliminating your policy checking and force-placing activities on the majority of your real estate loans.
  • Provided your mortgage lending staff verifies required mortgagor hazard insurance at loan closing, your servicing staff’s only insurance-related duty is to make sure to obtain insurance for foreclosed property on which title passes to you within 90 days from the date you take title.
  • The scope of coverage provided under the Lloyd’s Mortgage Protection Policy is very broad and comprehensive compared to many other insurers’ mortgage errors and omissions and mortgage impairment policies, and provides an important reason to purchase any of the coverage Options.
  • The most significant coverage element of the Policy is Section C, Direct Physical Loss or Damage from Balance of Perils.  Section C coverage responds to loss events for which you do not require mortgagor-provided coverage.  For example, if you require only basic fire and extended coverage and the mortgaged or REO property suffers a loss due to flood or collapse, your mortgage or owner interest is fully protected even though mortgagor coverage for these perils was never required or existed.

Property - Flood - Liability Coverage

Our Hazard Insurance Program offers insurance protection on real property, both residential and commercial, for uninsured loans. All-risk coverage is provided for residential properties, and named-perils coverage insures commercial exposures. Flood coverage, both voluntary NFIP and forced-placed, can be easily effected assuring compliance. Contact LRM to streamline servicing and eliminate this exposure.

Key Features Include:

  • Immediate binding authority up to $2,000,000
  • Dual and single interest coverage without coinsurance requirements
  • Simplified service administration and reporting option
  • Full-service client-based administration option via the secure simple to use website
  • Annual and monthly premium billing option
  • Competitive rates
  • Pro-rata refunds
  • Optional turn-key outsourcing on hazard and flood monitoring
  • Remote data entry interface option for brokers

We have provided an online tool for Hazard that is easy to use while still being flexible and powerful to provide great customer services.

Property Blanket

This product provides blanket property coverage only for real estate securing the lender’s mortgage loans, so the lender does not have to track borrower coverage.  It is an alternative to Mortgage Impairment coverage.

Property Blanket coverage includes:

  • Covers real property securing mortgage loans
  • Coverage is provided on a “blanket” basis to all specified mortgage loan types
  • Eliminates need to track borrower insurance coverage
  • Exception: OREOs must be individually scheduled on a Master Property Policy

Equiguard

In today’s highly competitive mortgage lending environment, second mortgage and equity line lenders are often faced with high service fees which are either absorbed by the lender or passed on to the borrower.

One such service fee necessary for the closing is a title search on a second mortgage or equity line.  The Equiguard Policy is a viable alternative to a traditional title search which provides lien position coverage. With the policy, lenders can stay ahead of the competition by processing loans with lien position coverage and at a lower cost than regular “search only” title services.

Competitive Advantages:

  • Lower cost than search only title services
  • The lenders lien position is insured unlike “search only” title services
  • Saves time since no search is being performed
  • If the loan is not closed, there is no fee

Flood Determination

We provide our clients with compliant and accurate flood certifications.

Our Flood Services include:

Life-Of-Loan Determination
Includes a basic determination plus tracking of zone changes for the life of the loan. If there is a change in the insurance requirement on the property we are monitoring, we will notify you. This is fully transferable should the loan be sold or transferred.

Basic Determination
Identifies the flood zone, community number, map and panel number, insurance availability, map date and entry-date.

Commercial Flood Determination
Provides life-of-loan determinations for commercial properties that include the community name and number, panel-suffix, map date for the Flood Insurance Rate Maps and community participation status.

Equity Protection Program

The Equity Protection Program (EPP) is a fully insured lending program designed to generate quality loans to qualified borrowers. The program allows for a broadening of underwriting guidelines, while at the same time, insuring the lender against loss due to borrower default.

Program Benefits:

  • Protects against borrower default
  • No foreclosure required
  • Expand LTV thresholds to 100%
  • One rate for all insured loan types
  • Balance sheet protection
  • Reduce capital requirements
  • Expense management tool
  • A.M. Best “A”-rated Carriers

Loan Types Included:

  • Home Equity Lines of Credit
  • Second Money Purchase
  • Secured Home Improvement
  • Unsecured Home Improvement
  • Closed End Seconds