What Is Mortgage Lending Risk Management & Why Do You Need It?

Today’s economic climate can be turbulent and uncertain. With a novel pandemic and increasing unemployment rates, the next few years seem almost certain to bring a rise in mortgage defaults. For lenders, these defaults can carry the risk of the borrower defaulting on the loan and the risk of the borrower allowing their insurance coverage to lapse. If a mortgaged property sustains uninsured damage, the value of your collateral could be in danger.

Anything from a natural disaster to vandalism can cause tens of thousands of dollars of damage to a property. Without insurance, many home and commercial property owners simply aren’t able to afford the cost of these repairs. When a property is heavily damage and uninsured, the next phase is almost always default and foreclosure. Once foreclosed on by the lender the property become real-estate-owned (REO), and that property must be insured by the lender/owner both for physical damage, and insured against potential liability risks, like slip & fall claims.

Mortgage lending risk management like blanket mortgage hazard, mortgage impairment insurance, outsourced insurance tracking, lender placed mortgage hazard coverage, and flood coverage can provide much-needed protection to lenders. Read on to learn more about the mortgage lending coverage Lee & Mason offers and how you can benefit from it.

What kinds of Mortgage Lending risks are there?

Mortgage lending risk management entails are variety of risks and coverage options: For lenders who want to internally track insurance status, mortgage hazard coverage and flood insurance can be added uninsured properties via MortgageHazard.com. Entire portfolios of residential and commercial mortgage properties can be protected by blanket mortgage hazard, mortgage impairment insurance, or full outsourced insurance tracking. All these risk management approaches can prevent mortgaged properties from falling through the cracks when the owner fails to make their required insurance payments. Mortgage defaults and foreclosure often go hand in hand with these lapses in insurance coverage. Those properties falling into foreclosure are more easily identified risks. But there are borrowers who continue making loan payments while having let their property insurance lapse, and those risks are harder to identify. Tracking the insurance status of all the properties in a portfolio is a complex, time-consuming process. Mortgage lending risk management, using blanket protection or utilizing outsourced insurance tracking, can take this hassle off your plate and guarantee that all of your properties are continuously covered.

What Coverages are Available for Mortgage Lending Servicers?

Lee & Mason provides a full array of coverage options that protect both residential and commercial mortgage properties, including:

  • Mortgage hazard coverage insurance and flood insurance on uninsured or real estate owned (REO) properties.
  • Blanket mortgage hazard and impairment insurance on commercial and residential portfolios.
  • Outsourced insurance tracking on all mortgaged properties.

With outsourced tracking, we handle all CFPB mortgage hazard notices and flood notices, as well as escrowed insurance payment invoices, making mortgage loan servicing easier for you. This is an ideal solution for lenders who want to be able to instantly access insurance coverage information for a specific property in their portfolio.

Blanket mortgage impairment insurance can provide important back-up protection for lenders who want track insurance internally. And when blanket mortgage impairment is purchased at Option 3 level coverage, the lender doesn’t have to invest in costly internal insurance tracking. Option 3 blanket mortgage impairment provides coverage for an entire portfolio, eliminating the need to track insurance coverage on individual properties. Alternatively, our outsourced tracking solution helps remove the burden of collecting, processing, and matching insurance-related communications to each of the mortgaged properties in your portfolio, while providing blanket protection for the tracked portfolio.

Don’t let a misplaced piece of insurance mail or a lapsed policy allow your mortgaged collateral to sustain uninsured damages. Contact Lee & Mason to learn more about the variety of services we offer.