Insurance for Lenders
Real Estate Lenders, private, thrift and funds, have insurance needs unlike most. The mortgage provides the lender a contractual interest against the property. To protect their interest, their mortgage requires that the borrower purchase Building Property Insurance on the property and name the lender as a loss payee.
For new construction or major renovation projects the lender will require that the borrower provide Builders Risk Insurance and name the lender as a loss payee.
If the property suffers damage, the insurance policy will provide the funds needed to repair or rebuild the damaged property and maintain the value of the property that the lender has an interest in.
Force Placed Insurance
If the borrower fails to pay the premium due for the required insurance policy, the policy will cancel for non payment. When this happens, the lender, listed as a loss payee, has the right to protect their interest in the property.
The lender is not a landlord, so the lender can not file an eviction against the borrower without going through the foreclosure process to acquire the property.
To protect their interest, the lender can contact the insurance company for the borrower to attempt to either pay the premium due. However, this is unlikely. If the insurance company underwriter is concerned about the financial stability of the borrower, a cancellation for non payment is a good opportunity to get off the risk.
The most likely option available to the lender is Force Placed Insurance. This is a policy that is purchased by the lender to protect their interest only, in the subject property. The cost for these policies is significantly more expensive than the standard policy purchased by the borrower. Per the mortgage, the lender can add the cost of this policy to the loan, for the borrower to repay.
For private lenders with only a few loans, the lender will apply for an individual policy with a short application. Underwriting is limited; address, property information and limit.
For portfolio lenders, there are programs available that provide online access so that the lender can place coverage instantly on any loan in their package
Repossessed Property
When the lender goes through the foreclosure process, they try to sell the property for the amount owed at auction. When the property does not sell at auction, the lender repossesses the property. This is referred to as Real Estate Owned, REO.
When the property becomes an REO property, the lender has an additional exposure; Liability. If anyone gets hurt on the property, the owner, lender, can be held responsible for the injuries. A General Liability policy will protect the lender against this exposure.
To discuss in depth and find out how to best protect yourself, please click the link to schedule a call: https://calendly.com/jdarringross/30min
Real Estate Lenders, private, thrift and funds, have insurance needs unlike most. The mortgage provides the lender a contractual interest against the property. To protect their interest, their mortgage requires that the borrower purchase Building Property Insurance on the property and name the lender as a loss payee.
For new construction or major renovation projects the lender will require that the borrower provide Builders Risk Insurance and name the lender as a loss payee.
If the property suffers damage, the insurance policy will provide the funds needed to repair or rebuild the damaged property and maintain the value of the property that the lender has an interest in.
Force Placed Insurance
If the borrower fails to pay the premium due for the required insurance policy, the policy will cancel for non payment. When this happens, the lender, listed as a loss payee, has the right to protect their interest in the property.
The lender is not a landlord, so the lender can not file an eviction against the borrower without going through the foreclosure process to acquire the property.
To protect their interest, the lender can contact the insurance company for the borrower to attempt to either pay the premium due. However, this is unlikely. If the insurance company underwriter is concerned about the financial stability of the borrower, a cancellation for non payment is a good opportunity to get off the risk.
The most likely option available to the lender is Force Placed Insurance. This is a policy that is purchased by the lender to protect their interest only, in the subject property. The cost for these policies is significantly more expensive than the standard policy purchased by the borrower. Per the mortgage, the lender can add the cost of this policy to the loan, for the borrower to repay.
For private lenders with only a few loans, the lender will apply for an individual policy with a short application. Underwriting is limited; address, property information and limit.
For portfolio lenders, there are programs available that provide online access so that the lender can place coverage instantly on any loan in their package
Repossessed Property
When the lender goes through the foreclosure process, they try to sell the property for the amount owed at auction. When the property does not sell at auction, the lender repossesses the property. This is referred to as Real Estate Owned, REO.
When the property becomes an REO property, the lender has an additional exposure; Liability. If anyone gets hurt on the property, the owner, lender, can be held responsible for the injuries. A General Liability policy will protect the lender against this exposure.
To discuss in depth and find out how to best protect yourself, please click the link to schedule a call: https://calendly.com/jdarringross/30min