If a loan defaults and an investor discovers the loan was originated fraudulently, the investor is going to require you to repurchase the loan. Mortgage Fraud Insurance, also known as Reps & Warranty Insurance For Loan Repurchase, was developed to protect originators from such a large out of pocket expense.
Beyond compensation, the insurance also carries with it a number of loss protection services. Key among these is the inclusion of legal services to investigate and pursue the mortgage fraud. The loss mitigation team will work to track down fraudsters to help recover the capital.
PLEASE NOTE: The Fidelity Bond with E&O Coverage (Mortgage Bankers Bond) that’s generally required by investors and warehouse lenders often only provides protection for mortgage fraud that is a result of employee dishonesty. Without Mortgage Fraud Insurance, you’re leaving yourself open to a major out-of-pocket loss by not properly protecting your company from the MANY other types of mortgage fraud, including fraud committed by borrowers.
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