Mortgage Hazard Insurance in California

Mortgage Hazard

When borrowers fail to maintain required hazard coverage on a financed property – regardless of it’s in California, Arizona or Oregon, lenders may protect their investment by purchasing lender placed mortgage hazard insurance.

Who needs it?

In most cases, it’s banks and credit unions that underwrite improved real estate loans and may need mortgage hazard coverage – this comes into play when their borrower fails to obtain their own insurance or doesn’t carry the required amount of hazard insurance.

Possible coverages

Mortgage hazard coverage frequently only covers the outstanding balance on real estate loan, for this is the extent of the lender’s exposure. Any equity that a property owner has often isn’t covered when a lender places coverage.

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Mortgage Hazard Insurance California

What is mortgage hazard coverage?

Typically, a real estate loan requires the borrower to maintain minimum levels of hazard insurance to protect the lender’s interest or collateral in the property.

Occasionally, borrowers don’t either acquire the coverage or don’t maintain the required amount of coverage. This is determined by continually monitoring your borrower’s compliance to the insurance requirements of the loan. When a borrower fails to maintain the required hazard coverage on a financed property, a lender may protect their collateral by purchasing lender-placed mortgage hazard insurance usually through the insurance tracking company.

Lender-placed mortgage hazard insurance generally fills in coverage gaps when property owners don’t carry the minimum required amount of coverage on financed properties. Because this is a highly specialized property insurance, lenders should work closely with a knowledgeable insurance professional when they’re seeking lender-placed mortgage hazard coverage.

What lenders should carry mortgage hazard coverage?

Lenders that underwrite and make loans on improved real estate, may need insurance tracking and lender-placed mortgage hazard insurance to protect against uninsured collateral losses. This includes lenders who underwrite home mortgages, residential investment property loans, commercial property loans and other real estate loans.

What coverages does mortgage hazard coverage provide?

Lender-placed mortgage hazard insurance is specifically designed to protect a loan’s collateral. Coverage is typically restricted to a lender’s financial interest in a property and risk exposure.

Mortgage hazard coverage usually covers only the outstanding balance on a real estate loan since this is the extent of the lender’s interest. Any equity that a property owner may have, isn’t normally covered when a lender places this coverage.

Additionally, mortgage hazard coverage does not provide the borrower/property owners with personal property or liability coverage.

What perils does mortgage hazard coverage include?

Lender-placed mortgage hazard coverage usually extends to physical perils, such as fire, theft, vandalism, malicious mischief, wind, lightning, and extended coverages. Precisely what perils are covered by a particular policy, are determined and detailed in the policy’s terms, conditions and exclusions.

Mortgage Hazard Insurance California

When does mortgage hazard coverage go into effect?

Lenders are generally able to acquire lender-placed mortgage hazard coverage on the day that a property owner allows their hazard coverage to lapse or otherwise become insufficient. When a lender is notified that sufficient coverage has been restored, lenders must stop and cancel the lender-placed mortgage hazard coverage and refund any unearned premiums to the borrower.

Who pays the premiums for mortgage hazard coverage?

The lender may pass on the premium to their borrower because property owners agree to maintain minimum coverage when taking out a loan and have not met that obligation if their coverage becomes insufficient. The premiums for lender-placed mortgage hazard coverage are expensive, and borrower/property owners will find that most standard fully underwritten hazard insurance is more affordable and provides more coverage.

Can lenders get mortgage hazard coverage in multiple states?

Mortgage Hazard policies are the lender’s coverage and are governed by the state where the lender is domiciled, and not necessarily the location of the real estate that secures the loan. And while insurance agencies tend to be primarily under one state’s jurisdiction, agencies like QuieTrack are able to assist with lender-placed mortgage hazard coverage in any state. 

What companies offer mortgage hazard coverage?

Lender-placed mortgage hazard coverage isn’t as readily available as standard hazard coverage, and only a few insurance companies underwrite this type of policy. Arch Insurance Company is one such underwriter. Lenders should work with an insurance agent, like QuieTrack, who has a 50 year track record of success, with no legal actions for their coverage or practices. 

How can banks and credit unions get mortgage hazard coverage?

To purchase lender-placed mortgage hazard insurance, contact an broker at QuieTrack Insurance Services. We specialize in insurance tracking and lender-placed insurance. We’re able to assist with coverage not only in California but nationwide. With our assistance, you can get the best coverage and service for your financial institution.

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