Mortgage Impairment Insurance: What is it and why should you consider it?

It’s always wonderful to wake up to a day that the sun is shining, the sky is clear and everything seems to go your way. You’re productive at the office, the children behave like angels, you have a wonderful meal and get a great night’s sleep. As blissful as those days are, we know that every day is not so perfect.

Accidents, errors, nature and “life” sometimes get in the way – something of which financial institutions are all too aware.

When it comes to real estate loans, especially, lenders are well versed in the negligent acts, errors or omissions that lead to a homeowner failing to have the required hazard insurance to protect their home in the event of fire, storm damage or other perils.

So, how do lenders prepare for the “not-so-perfect” days? How do they protect their owner interest and mitigate risk?

For many lenders, the answer is to diligently track insurance on hundreds of loans and force-place insurance on home owners who have allowed their hazard insurance to lapse.
But, what if financial institutions could take a big step back from the administrative burden and the expenses associated with tracking all of those loans?

Mortgage Impairment Insurance
Fortunately, there is a product designed specifically to protect the lender – and make life easier. Mortgage impairment insurance is a blanket product that eliminates the need to track insurance or respond to any cancellation notices within your real-estate loan portfolio. In addition to protecting you if the borrower fails to meet their insurance obligations, mortgage impairment insurance also protects your mortgage portfolio in the event of errors or omissions. Coverage is extended to the residential, second mortgage, commercial and home equity lines of credit in your real estate portfolio.

How does the coverage work?
Lenders Risk offers three levels of coverage (MP-1, MP-2 and MP-3). MP-3 is the most comprehensive, providing the most administrative freedom to the lender. With MP-3 coverage the process of tracking and force placing is fully eliminated. The lender only needs to take action when the title of the foreclosed property passes to them. Once the Lender takes title, they have an automatic 90 day window of REO coverage, after which they must schedule REO coverage on that specific property. Lenders Risk makes securing the REO coverage easy and convenient via our Web platform, with limited underwriting information necessary.

Is it really that easy?
Yes. From an administrative standpoint, the only action required by the lender is to confirm that the real estate securing the mortgage is covered by borrower-placed hazard insurance at loan closing. Once coverage is in place, the lender is no longer required to force place insurance, track insurance or respond to cancellation notices.

Interested in a proposal? Apply for a free quote here.