For Lenders, mortgage impairment insurance provides coverage on their collateral in the event of damage. The risk associated with loans of this magnitude can be transferred with insurance policies.
You likely know that when property damage occurs and a borrower is uninsured or underinsured, the lender must make an insurance claim of their own if they want to recover the value of the collateral.
What you may not know is that the policies have 3 main features.
In this article we’ll highlight the value of this specialty property insurance for mortgage companies, and the key reasons why tracking these claims efficiently leads to more profitability.
Three Features of Mortgage Impairment Insurance for Lenders
Miniter Group underwriters design compliant Mortgage Impairment policies for some of the largest lenders in the USA. These three features are key for any policy:
This coverage requires default by the borrower and includes a wide range of perils (ie: earthquake). A lapse in the borrower’s insurance will trigger 90 days of coverage to allow lenders to re-establish primary layer insurance. Borrower insurance and force-placed insurance are examples of primary layer insurance.
Loss exposures that are associated with servicing the mortgage. This coverage acts as E&O insurance for the loan servicing department.
A properly underwritten mortgage impairment policy will utilize the liability insurance described above to meet GSE compliance requirements in the secondary market. This coverage is loosely named mortgage holders E&O insurance.
If you have any questions, our Mortgage Impairment experts are available to provide a compliance review of your MI program. Submit your question or request a review here.
Mortgage Impairment Insurance Requirements and Regulations
Mortgage Impairment Insurance coverage is required for all lenders that originate or service mortgages for Fannie Mae, Freddie Mac, Ginnie Mae, or the Federal Home Loan Banks.
These Government Sponsored Enterprises (GSEs) have very specific requirements for MI and Mortgage E&O coverage.
A properly designed Mortgage Impairment policy will meet these requirements; but they are complex and require expertise to navigate the gray areas associated with liability for the lender.
We protect both the servicer and the seller against claims of negligence for these servicing activities like
- Flood Determination
- Hazard and flood insurance tracking and maintenance
- Payment and tracking of real estate taxes
- Mortgage insurance or loan guaranty maintenance
Learn what makes our solutions different, and how they make your loan servicing operations more profitable