Mortgage Impairment Insurance
A traditional Mortgage Impairment (MI) policy provides the following coverages:
First party coverage - protecting the insured as mortgage owner from a loss of its mortgagee interest resulting from:
- Borrower default due to lack of insurance on the collateral;
- Government confiscation due to a failure to pay real estate taxes;
- Loss of mortgage guarantee or mortgage insurance;
- Physical damage caused by perils for which the borrower is not required to purchase insurance, such as flood or earthquake.
Third party coverage - protecting the insured from liability resulting from errors or omissions while performing origination and mortgage servicing functions such as:
- Failing to maintain property insurance on behalf of the borrower;
- Failure to pay real estate taxes;
- Failure to properly identify a property in a Special Flood Hazard Area;
- Failure to maintain mortgage guarantees or mortgage insurance.
All mortgage originators and mortgage servicers should purchase MI. Mortgage Impairment 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.
Raymond Reed, Miniter’s Senior Vice President of Underwriting, has been underwriting and customizing Mortgage Impairment coverage for the country’s largest and most sophisticated mortgage lenders for over 20 years. Miniter’s unique MI application has been designed to develop information necessary to customize our client’s coverage to best protect their mortgage portfolio and to assure compliance with the various GSE requirements.