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Mortgage Impairment Coverage Summary - E-Risk Services Flipbook PDF
Mortgage Impairment Coverage Summary 3 B Extension Post Termination Extension. Extends the Financial Institution’s inter
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Mortgage Impairment Coverage Summary Coverage Section A(1)(a)
A(1)(b) Extensions
Coverage Section Name Direct Physical Loss or Damage from Required Perils Coverage.
Condominium Extension.
Description*
Example of a Potential Claim**
Covers loss to the Financial Institution’s interest as a result of the inability to collect or non-existence of insurance against perils that are required to be purchased by the borrower.
1.
Eliminates the need for the Financial Institution to require owners of condominiums to purchase homeowners insurance. However, the condominium association is required to hold a master physical damage insurance policy covering the borrower’s condominium unit.
1.
2.
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If the borrower’s homeowners insurance company becomes insolvent and the borrower’s house were to be destroyed by fire, than this coverage section would pay for the loss suffered by the Financial Institution. If the borrower’s homeowners insurance lapses due to the non-payment of premium and the borrower’s house were to be destroyed by fire, than this coverage section would pay for the loss suffered by the Financial Institution. If the condominium owner does not maintain homeowners insurance and the condominium association’s insurance company becomes insolvent and the condominium were to be destroyed by fire, than this coverage section would pay for the loss suffered by the Financial Institution. If the condominium owner does not maintain homeowners insurance and the condominium association’s insurance lapses due to the non-payment of premium and the condominium were to be destroyed by fire, than this coverage section would pay for the loss suffered by the Financial Institution.
A(1)(c) Extensions
Other Insurance Investigation Extension.
Covers the cost of investigating the inability to collect or non-existence of insurance required for coverage under section A(1)(a) and A(1)(b).
If the Financial Institution suffers a loss that is denied by the borrower’s homeowners insurance company, than this coverage section would cover the cost to investigate and determine whether coverage should be afforded by the homeowners policy or coverage section A(1) of the Mortgage Impairment policy.
A(2)(a)
Procuring or Maintaining Mortgagors’ Insurance Policies Coverage.
Covers claims resulting from errors or omissions relating to the Financial Institution’s handling of the borrower’s insurance including fire, extended coverage, and mortgage guarantee insurance.
If the Financial Institution escrows for the borrower’s homeowners insurance and the Financial Institution fails to pay the insurance premium for this policy on behalf of the borrower, then this coverage section would pay for damages (borrower’s interest) if the borrower’s house were to be destroyed by fire.
A(1) and A(2) Extension
Trust Properties Extension.
Extends A(1) and A(2) coverage to properties held in trust by the Financial Institution.
If the Financial Institution is holding a mortgage in trust on behalf of an investor and the borrower’s homeowners insurance company for this mortgage becomes insolvent and the borrower’s house were to be destroyed by fire, than this coverage section would pay for the loss suffered by the financial institution, investor, and/or borrower.
A(3)
Failure to Pay Real Estate Tax Mortgage Interest Coverage.
Covers the Financial Institution’s interest if the property is seized by a governmental agency for the failure to pay real estate taxes.
If the borrower fails to pay the real estate taxes on a property and the government seizes the property for such non-payment, then this coverage section would pay for the loss incurred by the Financial Institution for its interest in the property.
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Mortgage Impairment Coverage Summary A(2) and A(3) Extension
Post Termination Extension.
Extends the Financial Institution’s interest as a lender for 12 months following the satisfaction of a mortgage.
If the Financial Institution has been escrowing for the borrower’s homeowners insurance for the life of the loan but discontinues payment of such insurance after the satisfaction of the loan and fails to inform the borrower that they are now responsible for making the insurance payments, then this coverage section would pay for damages (borrower’s interest) if the borrower’s house were to be destroyed by fire and the homeowners policy had lapsed.
B(1)
Real Estate Tax Coverage.
B(2)
Recordation Coverage.
B(3)
Life and Disability Insurance Coverage.
If the Financial Institution escrows for the borrower’s real estate taxes and the Financial Institution fails to pay the taxes on behalf of the borrower, then this coverage section would pay the borrower for their interest in the property if the property is seized by a governmental agency. If the Financial Institution is servicing a loan on behalf of GNMA and the Financial Institution fails to record the loan with the local municipality, then this policy would cover damages incurred by GNMA. If the Financial Institution escrows for the borrower’s life insurance and the Financial Institution fails to pay the premiums for such insurance on behalf of the borrower, then this coverage section would pay the borrower the amount of the life insurance policy.
B(4)
Flood Act Coverage.
Covers claims resulting from errors or omissions relating to the Financial Institution’s handling of the borrower’s real estate taxes. Covers claims resulting from the Financial Institution’s failure to record loans with any governmental entity. Covers claims resulting from errors or omissions relating to the Financial Institution’s handling of the borrower’s life, accidental death and dismemberment and disability insurance. Covers claims resulting from errors or omission by the Financial Institution in determining whether a property should be covered by flood insurance.
B(5)
GNMA, FNMA, and FHLMC Guidelines Compliance Coverage. Title Errors and Omissions Coverage.
Covers the Financial Institution, as a mortgage servicer, against errors and omissions should the Financial Institution fail to comply with GNMA, FNMA, and/or FHLMC guidelines. Covers errors or omissions in processing the title insurance on behalf of the borrower.
If the Financial Institution fails to comply with all the guidelines established by GNMA, then this coverage section would pay an investor for their loss as a result of the GNMA guarantee being lost.
Custodial Insurance.
Covers the Financial Institution if GNMA, FNMA or FHLMC brings suit for not maintaining or safeguarding loans which are held in custody by the Financial Institution.
If loans which are owned by GNMA are being held and maintained by the Financial Institution are destroyed by fire, then this policy would cover the loss to GNMA’s interest.
B(6)
B(7)
If the Financial Institution fails to determine that the borrower’s property should be covered by flood insurance (as required by the Flood Act), then this coverage section would pay the borrower for its interest in the house if the property were to be destroyed by flood.
If a title abstractor makes an error in searching for any liens on a property and the borrower brings suit against the title abstractor as well as the Financial Institution for their involvement in the process, then this coverage section would pay the defense costs for the Financial Institution (contingent coverage).
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Mortgage Impairment Coverage Summary B Extension
Post Termination Extension.
Extends the Financial Institution’s interest as a lender for 12 months following the satisfaction of a mortgage.
C
Direct Physical Loss or Damage from Balance of Perils Coverage. Loss of VA, FHA, SBA and Private Mortgage Guarantee Coverage.
Covers the Financial Institution’s interest for damage as a result of a peril that is not required to be covered by the borrower.
D
E
Loss of Mortgage Interest Due to Defective Title Coverage.
Covers loss to the Financial Institution’s interest should they fail to notify a “mortgage guarantee” agency or a Private Mortgage Insurer (PMI) of the existence of loans in arrears. Covers the Financial Institution’s interest in property resulting from the impairment of title insurance.
If the Financial Institution escrows for the borrower’s real estate taxes and the Financial Institution fails to pay the taxes on behalf of the borrower, then this coverage section would pay the borrower for their interest in the property if the property is seized by a governmental agency even if the seizure of such property took place after the satisfaction of the loan. This coverage section would pay for the Financial Institution’s interest if the borrower’s house were to be destroyed by earthquake.
If the Financial Institution does not inform the PMI carrier of a mortgage in arrears and as a result the PMI carrier denies a claim, then this coverage section would pay the loss that would have been paid by the PMI carrier.
If a title abstractor makes an error in searching for any liens on a property and the title insurance company becomes insolvent (or the title insurance policy has lapsed), then this coverage section would pay for the loss to the Financial Institution’s interest (which would have been payable by the title insurance company) as a result of the defect in title. *Please review the policy terms and conditions for a more detailed description of the coverages provided. **These examples of potential claims are for illustrative purposes only and are not to be deemed as coverage interpretations. All claims are subject to the allegations of that specific claim and the terms and conditions of each specific policy.
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