Mortgage Protection

Mortgage Errors & Omissions and Impairment
  • Mortgage E&O covers the bank against errors and omissions related to the bank's handling of physical damage insurance and homeowners insurance covering the real property of borrowers.
  • Mortgage Impairment protects the bank when a mortgage becomes impaired (i.e. goes into default) and property insurance is uncollectable, insufficient, or nonexistent. Coverage is only extended for the Required Perils noted on the borrower's loan documents, including flood (if required).
  • Additional coverage is available, including Balance of Perils, Real Estate Tax Liability, Title Insurance, Flood Zone Determination, Property Held-In-Trust, Mortgage Guaranty Protection.
  • Coverage can be provided on either a Checking or Ex-checking basis. Checking requires the bank to maintain a system to track borrower placed insurance on an annual basis. Ex-checking requires the bank to verify that hazard coverage is in place to close the loan with no requirement to check annually.
  • Policies can be written on one-year or three-year term.

Claims Examples

Mortgage E&O

A bank agrees to escrow and pay insurance premiums on behalf of its borrower. Due to an inadvertent error on the part of a bank employee, the premiums are not paid and the coverage is cancelled by the homeowner’s insurance carrier. Fire damage to the property occurs but is not covered due to the cancellation of the coverage. The borrower sues the bank for failing to pay the premium.

Mortgage Impairment

The bank forecloses on a property and discovers storm damage on the property shortly thereafter. The bank files a claim with the property's insurance company on record, only to discover that the insurance had lapsed due to nonpayment of premium. As such, the bank is unable to recover from the property's carrier and files a claim under its Mortgage Impairment policy.


Coverage Summary
Coverage Definitions
Application
Mortgage E&O/Impairment             
Force Placed/Foreclosed Property
  • Our stand-alone solution for foreclosed and force placed properties is a comprehensive program designed to manage insurance risk for the life cycle of a loan.
  • All commercial and residential properties–occupied or vacant–are covered, without additional underwriting or preapproval requirements with respect to occupancy type, number of properties or property limits. This includes manufactured homes and vacant land.
  • Coastal properties are eligible for coverage (subject to underwriting guidelines).
  • Our program eliminates potential coverage gaps as more carriers curtail adding foreclosed properties to their package policies.
  • Our program includes options for insuring properties at replacement cost, ACV or for outstanding loan balance.
  • Our separate program insulates your P&C package from foreclosed property and liability losses.
  • REcover™, our internet-based reporting system, makes scheduling and tracking easy, thereby minimizing administrative costs.
  • A blanket force placed coverage option is available to eliminate the bank's record keeping requirements.
Coverage Summary
Application
  Force Placed Foreclosed Coverage

Notwithstanding any language to the contrary, nothing contained herein constitutes nor is intended to constitute an offer, inducement, promise, or contract of any kind. All coverage descriptions and claims examples are provided for informational and educational purposes only and are not a representation as to coverage for any particular claim and are not represented to be error free. Coverage for any claim is determined upon the specific facts of the claim, the terms and conditions of the policy and applicable law. For details on the coverage provided by your specific contract of insurance, please refer to your policy. Coverage is subject to underwriting guidelines and may not be available in all states. Limits may be capped for underwriting reasons. Any links to any sites which are not originated by ABA Insurance Services Inc. (ABAIS) are provided only as a courtesy and are not intended to nor do they constitute an endorsement by ABAIS of the linked materials.