December 14th, 2020
As mortgage loan servicers grow in size and diversify their portfolios, internal property insurance tracking can become more and more cumbersome. Meanwhile, the potential losses that may be incurred during even a brief lapse in coverage for a single property can be substantial. For some, outsourcing the insurance tracking process can free up employee time to focus on more demanding tasks. Discover the advantages and disadvantages of the two different types of insurance tracking from the financial team at Lee & Mason.
WHAT IS MORTGAGE INSURANCE TRACKING — AND WHO NEEDS IT?
Insurance tracking allows mortgage lending servicers to monitor insurance coverage and minimize the risk that any mortgaged property will suffer an uninsured loss. With housing prices reaching new highs throughout the U.S., many homeowners are under more financial strain than ever before. If a homeowner’s insurance is not escrowed, it can be tough for servicers to promptly receive notice that the homeowner has allowed their policy to lapse. Any loss during this time, even something as common as a tree falling on their roof, can diminish the value of the lender’s collateral.
Further, many commercial mortgage customers are suffering diminished revenues during the pandemic. Commercial property insurance may go unpaid as the business owner strains to stay afloat. Close monitoring of insurance status on commercial properties is much more difficult for mortgage lenders due to the complicated nature of commercial property policies. And, in many cases, there is a need to insure multiple structures under the policy.
Any institution with mortgaged properties in its portfolio can benefit from mortgage insurance tracking.
INTERNAL VS. OUTSOURCED MORTGAGE INSURANCE TRACKING
In our current economic climate, mortgage lenders are seeing a greater need for mortgage hazard insurance or commercial hazard insurance, both of which can provide seamless coverage to benefit lenders as soon as a property goes uninsured. Many servicers start with internal mortgage insurance tracking by assigning an employee or department to continually monitor insurance coverage. If this employee learns that a property’s insurance policy has lapsed, they can send a letter asking the borrower to provide current insurance on the property; and then add hazard insurance if the borrower fails to respond, notifying the borrower that hazard insurance premium will be charged to his/her loan account.
Over time, this internal tracking process is not always the best use of a servicer’s time, and getting it right requires insurance policy knowledge and attention to detail. This means it is important to delegate this task to a higher-level employee, which can bring on even more expenses if you need to hire someone with this type of experience. In addition, your customer service representatives may find themselves on the receiving end of angry calls and emails if they’re the ones responsible for sending out force-placed insurance letters to clients. By outsourcing your insurance tracking, you’ll be able to reduce this type of communication, reconfigure your employee’s responsibilities, and boost office morale while eliminating the risk of having an uninsured property fall through the cracks.
NEED TO OUTSOURCE YOUR INSURANCE TRACKING? LETT LEE & MASON HELP
If you are thinking of outsourcing your insurance tracking processes, look no further than Lee & Mason. Our methods are quick, effective, and cost-efficient. Connect with a Lee & Mason representative today to learn more about the different types of coverage we offer!