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What Is Mortgage Impairment Insurance?
Also known as Mortgage Protection or Mortgage E&O coverage, a Mortgage Impairment policy addresses multiple risks facing mortgage lenders and servicers.
Depending on how the policy is written, lenders can leverage their Mortgage Impairment coverage to support a tracking process (internally or via a third-party) or eliminate most of the work associated with insurance monitoring.
Features
- Covers lender’s entire portfolio of residential mortgages and commercial real estate loans
- Coverage customized to support different processes:
- Checking: lender proactively monitors all borrower insurance, verifying coverage at least annually
- Ex-checking: lender responds to cancellations and/or non-renewals within 90 days
- Blanket: lender stops tracking hazard insurance after initial verification and eliminates the need to respond or force place hazard insurance
- Includes coverage for flood both in and out of Special Flood Hazard Areas (SFHA)
- Earthquake included in 49 states regardless of loan requirement. Available in CA for additional premium
- E&O coverages include escrow (insurance and tax) mistakes as well as flood determination errors
- Foreclosed (REO) properties can be easily scheduled through Lee & Mason’s MortgageHazard.com or 1-Off programs
Benefits
- Regardless of approach, creates a safety net for the entire real estate portfolio
- Can eliminate labor intensive follow-up and reduce internal costs
- Satisfies investor, secondary market and examiner E&O requirements
Who Needs Mortgage Impairment Insurance?
Mortgage impairment insurance provides a crucial array of coverages for mortgage lenders and servicers regardless of size. Beyond the valuable protection it affords to mortgages retained on the lender's balance sheet, mortgage impairment is typically required by examiners, auditors and secondary market investors like Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
Mortgage Impairment Protects Real Property Against Physical Damage
A lender's loan agreement only requires a borrower to insure against Fire, Extended Coverages, and Flood if the structure is located in a Special Flood Hazard Area (SFHA).
Lee & Mason's Mortgage Impairment policy, like many others, affords contingent coverage should a borrower's coverage lapse or prove inadequate at the time of loss.
The additional value of our program is significant in that we offer Balance of Perils coverage to every insured. This transforms the physical damage protection essentially to Special Form and insures against damage you do not, and in some cases cannot, ask your borrower to purchase. Most commonly, this includes Earthquake and Flood to structures not located within a SFHA but can also apply to Frozen Pipes and Theft losses.
Mortgage Impairment is a Safety Net for Loan Servicing
In addition to the protection against uninsured or under-insured physical damage losses, Lee & Mason's Mortgage Impairment coverage includes a bevy of Errors & Omissions protections related to mortgage servicing.
Most notably, dedicated coverage sections (and limits) include insurance escrow liability, flood determination E&O and real estate tax liability.
Lee & Mason's Mortgage Impairment policies are well-regarded by examiners, auditors and investors alike thanks to the robust coverages they provide.