Blanket mortgage impairment insurance (BMII) is a type of specialty property insurance. It provides mortgage companies with coverage for their interest in mortgaged property under certain circumstances — most commonly when the property owner or renter has failed to maintain insurance on the property and name the lender as the mortgagee.
This type of coverage preserves the value of the lender’s investment while preventing them from having to go after property owners for breach of contract if a mortgaged property is damaged after insurance coverage lapses. Additionally, gain coverage for various servicing errors & omissions.
Mortgage impairment insurance provides a crucial array of coverage for both mortgage servicers and mortgage originators. Federal National Mortgage Association (FNMA or Fannie Mae) and Government National Mortgage Association (GNMA), among others, require participating lenders to carry these policies in the absence of other coverage on a mortgaged property.
In the context of mortgaged properties occupied by owners or renters who may not be maintaining mandated insurance coverage, these extra protections can be critical to preserving a lender or servicer’s financial investment. And with no insurance tracking required and the ability to disclose (and pass on) any BMII premium to the borrower, the process is easier and more streamlined than ever.
BMII policies can be written to cover loss due to a mortgagee’s required perils or “non-required perils,” depending on the property’s specific risk profile. But in addition to mirroring the coverage the property owner is required to maintain, BMII policies can include extra protections for the lender, ranging from limits on liability for mishandling escrowed insurance premiums (which could impact a property owner’s insurance and tax payments) to failing to properly identify and secure coverage that is required by regulation or law.
Just a few of the benefits of a Lee and Mason BMII policy include:
These types of policies all but eliminate the need to follow up with a homeowner after closing to track down their insurance information or to track and report individual properties to maintain coverage. This can significantly streamline any servicer or another mortgage professional’s recordkeeping requirements.