Blanket Mortgage protection covers a lender’s entire mortgage portfolio for property damage and is an alternative for force-placed mortgage hazard insurance. This coverage is designed to cover unknown lapses in a homeowner’s insurance coverage. When a loss occurs to a mortgaged property and primary insurance is not in place, the lender is protected up to the outstanding loan balance.
Blanket Mortgage provides all-risk property damage protection on uninsured and underinsured losses to residential and commercial mortgage portfolios. Loan types include 1st & 2nd mortgages, home equity lines, and commercial real estate loans. Click here to read our blog post, "What does Blanket Insurance Cover?"
Benefits of Blanket Mortgage
- Blanket coverage eliminates renewal/cancellation insurance tracking after insurance has been verified at closing
- Eliminates risk of false force-placement premiums on covered loans and unnecessary debits and credits
- Reduces negative borrower contacts with dual-interest coverage taking the place of force-placed notifications
- Properties are covered through the foreclosure process
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VSI protection covers a lender’s consumer portfolio from uninsured losses to repossessed or unrecoverable collateral. All new and existing loans are automatically covered at policy inception. The blanket nature of the policy eliminates the need to track and force-place insurance after loan closing, and skip tracing services help locate missing collateral.
- Prevents negative contact with borrowers regarding insurance lapses
- Eliminates the time and expense to track borrower insurance
- Reduces charge-offs
- Avoids uninsured losses due to unknown insurance lapse or cancellation
- Broad coverages customized to each lender’s titled/UCC’d portfolios
View our blog post, "How Lenders Reduce Workloads, Save Money, and Improve Examinations" to read more about Blanket Vendor Single Interest can impact your bottom line.
Standard Coverage on VSI Policies
Physical Damage & Theft Protectionprovides blanket all-risk coverage for damage or theft prior to repossession. Partial and total losses from physical damage and theft are covered up to policy limits. Police reports are only required for theft if obtainable.
Skip and Confiscation Protection covers losses caused by the inability to locate a borrower or obtain collateral seized by a public official. Skip coverage includes professional skip tracing efforts with high success rates to help minimize claims. Repossession services are also available as part of the skip tracing efforts after a borrower and/or collateral has been located.
Modified Actual Cash Value (GAP) pays the difference between the actual cash value (ACV) of a vehicle and the principal loan balance in the event of a total loss up to a limit of $5,000. The actual cash value is based on an average of the NADA clean retail and NADA clean trade-in values.
Non-Filing (Errors & Omissions) covers losses caused by improperly filed liens or unfiled liens on covered collateral.
Repossessed Physical Damage covers physical damage losses sustained within one hundred and twenty (120) days after repossession of your collateral.
Additional Endorsements Available to Ensure 360 Protection
- Mechanical Breakdown Expense
- Broad Form Skip
Coverages offering reimbursement include:
- Mechanics Liens
- Repossession Storage Expenses
- Additional repossession and return expenses
- Primary insurance deductible up to maximum limits
Blanket single-interest insurance for equipment protects from uninsured losses on loans/leases when equipment is held as collateral. The blanket nature of the policy eliminates the need to track and force-place insurance after loan closing.
- Prevents negative contact with borrowers regarding insurance lapses
- Eliminates the time and expense to track borrower insurance
- Reduces charge-offs
- Avoids uninsured losses due to unknown insurance lapse or cancellation
Standard Coverage
Physical Damage & Theft Protection provides blanket all-risk coverage on eligible uninsured collateral during and after repossession* including collision, rollover, and fire. Blanket Equipment offers higher limits of liability, including coverage for tangible collateral, that a typical VSI program does not offer. All losses are covered unless excluded. Forcible entry theft evidenced by a police report are covered provided the claim is submitted within 60 days of the date of loss. The coverage also satisfies auditor and examiner requirements for collateral insurance.
*For items in which physical repossession is impractical, legal repossession is acceptable providing the collateral has been secured from continued use.
Compliance
Many lenders believe that Blanket Portfolio Protection is the best program for a compliant solution. Force-placed collateral protection insurance (CPI) plans have had a multitude of lawsuits, fines and payouts associated with them over the years. High cost of force-placed CPI insurance, refund issues when the policies are canceled, and various forms of reimbursements and kickbacks to the lenders that use the programs are a few scrutinized issues. Furthermore, institutions are written up during examinations for improper tracking and notification procedures along with charging inaccurate force-placed premiums.
Positive Customer Experience
Blanket coverage programs for lenders have positive customer service implications that can be significant as this protection eliminates many risks and hassles.
Most of your customers have insurance on their collateral at any given time, yet it is commonplace for proper insurance documentation to be missing. Borrowers change policies, insurance mail doesn’t get delivered, items cross in the mail and are late, and insurance carriers fail to notify you of a new policy. These instances cause your tracking or your outsourced tracking provider to send a notification to the borrower. This results in hassles and frustrations for the borrower to contact their insurance company or agent. A vicious and time consuming cycle begins that could leave the customer with a negative feeling about your institution. Many lenders have decided they do not want to take the chance of upsetting their customers over insurance. They see the Blanket Portfolio Protection as a safeguard to ensure good customer service.
Key Benefits
- A customer-friendly process that eliminates negative borrower contacts
- Complete elimination of outsourced or internal insurance tracking including all insurance related letters, phone calls, and emails
- Reduces loan servicing staffing, management, internal systems and training costs
- Eliminates force-placing of expensive premiums on borrowers
- Less legal risk than outsourced tracking with CPI
- Automatic and paperless
- Premiums are paid by the borrower
- The entire portfolio is covered on the first day of policy inception
- Allows your staff to focus on lending and deposits, not insurance administration
How lenders reduce workload and expenses and improve examinations
For financial institutions to properly track insurance and cover consumer loan portfolio collateral, there are three basic options to consider.
Tracking Insurance Internally
This option requires a lender to track insurance internally by notifying borrowers of lapses and working with local agents and insurers to get coverage back in place. Many lenders find this to be a costly option and also leaves quite a few borrowers uninsured at any given time, although there is control over the insurance documentation process.
Outsourced Insurance Tracking
This solution encompasses a company that will provide all of the services related to tracking including letters, phone calls and force-placing individual policies on borrowers when lapses occur. This could, however, create system billing issues as force-placed premiums can be high, and the lender can lose control over the entire process. Some may choose this option because it does insure borrowers that lack coverage (physical damage coverage only), and many times tracking companies provide a more enhanced service than what could be done internally.
Self-insuring
This is the least common option because it encompasses the most risk, but it is one way to eliminate all of the administrative work and hassle that comes with insurance tracking. Some auditors and regulators are not partial to self-insuring without tracking due to the risk of loss when there isn’t much information on the risk since insurance isn’t being tracked. Loan loss reserves also have to be set up to account for that risk, which fluctuate greatly year to year based on economic conditions.
Using alternative credit scoring can help lenders make more loans.
Blanket insurance for lenders is an easy, customer friendly, cost effective way to cover an entire collateralized portfolio. It is available to cover mortgage, consumer, and equipment loan portfolios. It features complete elimination of outsourced or internal insurance tracking including all related letters, phone calls, and emails and reduces loan servicing staffing, management, internal systems and training costs. It also eliminates force-placing of expensive premiums on borrowers and involves less legal risk • VSI The entire portfolio is covered on the first day of policy inception and allows staff to focus on lending and deposits, not insurance administration.
