Many lenders who still manually track mortgage insurance may have heard of a solution to tracking mortgage collateral insurance called Blanket Mortgage Insurance. But what does blanket mortgage protection typically cover? The master policy in many cases is identical to what would be issued in the typical tracking and lender-placed scenario. The same limits can be obtained, and all the same coverages and exclusions still apply. Some companies offer other versions of blanket mortgage, so it is important to clarify exactly what’s covered and what’s not. Blanket Mortgage can cover all real estate in your portfolios and can be separated out by portfolio. For example, you can buy the protection on your commercial real estate loans or just on your first mortgages. Some lenders only purchase it on home equity and second mortgage portfolios, which are the least expensive to insure.
Can secondary market loans be protected on the Blanket Mortgage program? Many lenders of various sizes that have purchased the coverage have secondary market loans in their portfolios. Freddie Mac and FannieMae have not put in writing that they will accept the blanket coverage, however, their guidelines (section 8202.8, evidence of insurance) state that if you don’t track insurance documents, you must have a separate blanket mortgage policy in place. Additionally, many of the regional secondary market representatives have verbally stated that they understand why lenders buy it and that it is good protection. The concern is the transferability of the blanket protection on the loan. However, the same issue exists with individual hazard policies since the existing insurance company lists the initial lender as the insured and are under no obligation to cover whoever the loan might be transferred to. In the rare case where a loan is transferred to the secondary marketer any other bank, lenders who have purchased the coverage have made the choice to buy the loan back if insurance is an issue. In actuality, the new owner of the loan would have their own blanket mortgage or lender-placed policy in place, and that individual loan would still be covered after transfer.
Check with your blanket mortgage provider to ask for references of lenders with secondary market loans. Although not officially sanctioned by the secondary market entities, many lenders are using Blanket Mortgage, and have passed regulatory examinations with the coverage in place.
Blanket Insurance for lenders is available for equipment and auto loans as well. Click here for more information on all of the blanket insurance polices offered.