30 Nov Coverage Options for Blanket Mortgage Impairment Insurance
Blanket mortgage impairment insurance is a type of back-up mortgage property protection for the lender’s residential and commercial mortgage portfolio. This coverage comes in three different forms: full-blanket, ex-checking, and checking. Below we’ll explain further what each of these options includes and how they differ from each other. We’ll also explain how lenders can choose the best coverage for their specific needs.
What is Blanket Mortgage Impairment Insurance?
Blanket mortgage impairment insurance is specialty property protection that provides mortgage companies with back-up coverage for their property interests. In addition to the property coverage provided, mortgage impairment policies protect the lender from a variety servicing errors and omissions.
The most common situation covered is when a property owner has allowed their insurance to lapse or hasn’t named the lender as the mortgagee. With blanket mortgage impairment insurance in effect, the mortgage lender or servicer is protected from covered losses, primarily uninsured damage to the property, provided the mortgage lender has complied with the conditions of coverage required by the policy.
What Types of Blanket Mortgage Impairment Insurance Policies are Available?
Whatever level of blanket mortgage impairment insurance coverage is selected, the mortgage lender must initially verify that property insurance is in force when the loan is made, and then, depending on which level of protection the lender choses, the blanket mortgage lender protections cover specific lapses or omissions.
This policy is the most comprehensive type of blanket mortgage impairment insurance. It essentially functions as a blanket mortgage hazard policy so long as it’s endorsed as an Option 3 or MP3 policy. This removes the lender’s obligation to track insurance or respond to a canceled policy within 90 days of cancellation.
An ex-checking blanket mortgage impairment policy doesn’t require continuous internal tracking or monitoring; however, it does impose the 90-day requirement — requiring the lender place insurance if it becomes aware that the borrower’s insurance has been canceled or otherwise lapsed. Though these policies don’t require the lender to continuously monitor coverage on portfolio properties, the lender is required to place coverage once it becomes aware of an uninsured property within 90 days time. A checking policy, as the name implies requires continuous annual monitoring of the insurance status of each property in the portfolio.
Checking policies offer the least expensive premiums of blanket mortgage impairment policies. In exchange, they require the lender to engage in continuous tracking of property insurance on all mortgage properties in the portfolio. Lenders are given 90 days to take action on an uninsured property, though very few use this full period. Many lenders opt to outsource their mortgage hazard tracking services to avoid the internal cost and burden. In some cases, combining outsourced mortgage tracking with a checking policy is cheaper than a full-blanket or ex-checking policy.
Note: Whatever level of impairment coverage is selected by the lender, the lender will need to force-place coverage, both hazard and liability, on any foreclosed residential or commercial property, often call REO (Real Estate Owned) properties. Lee & Mason provides the perfect tool for force-placing hazard or flood insurance: MortgageHazard.com.
A Full Suite of Coverage Options from Lee & Mason
For many lenders, selecting the right policy for your needs can be challenging — Lee & Mason can help. We offer a broad range of blanket mortgage impairment options that can be tailored to your portfolio and your business’s needs. Contact us today for information about our blanket mortgage impairment insurance options.