Mortgage Impairment Policy
Each time your financial institution provides financing for a mortgage, you encounter a potential financial risk. As a lender, you need protection from mortgage repayment impairment and legal liability losses that arise out of your mortgage operations.
Mortgagee Impairment Policy Overview
Mortgage impairment losses come about when there is physical damage to uninsured mortgaged properties and the mortgagor defaults. Legal liability losses occur when you fail to either maintain insurance or make payment from escrow on behalf of a mortgagor.
The Mortgage Impairment Protection Policy provides protection if a mortgage becomes impaired because of physical damage to the mortgaged property when it is uninsured for at least the perils required in the mortgage agreement. A coverage limit is chosen by the lending institution.
Impairment insurance will substantially reduce the administrative work relating to hazard insurance and reduce the risk to the mortgage portfolio. Additionally it will:
- Eliminate filing renewal hazard policies in each mortgagor's file;
- Eliminate "tickler" systems to follow up on renewal policies
The Mortgage Impairment Policy is designed for lending institutions that are engaged in granting primary residential and small commercial mortgages. The program provides Mortgagee Interest and Mortgagee errors and accidental omissions insurance for the institutions interest in collateralized properties in the event that primary coverage is not in force and the policy conditions are met.
Mortgage Impairment Policy Features
- Covers all residential, first, second (including home equity) and commercial mortgages
- Protects the organization's collateral when primary insurance on mortgaged property is uncollectible, or if the insurer is insolvent
- Covers mortgaged property during and after foreclosure for a period stated in the policy
- Coverage includes participating mortgages and mortgages serviced for others
- Flood insurance coverage, including failure to determine if a property is in a special flood hazard area, and mobile home trailer coverage can be added to the basic form
- Trust department properties can also be covered