Business owners and individuals purchase property using mortgages on a daily basis. While the market is good, the mortgage industry flourishes, but the risks never cease. Common lawsuit risks covered by indemnity insurance mortgage coverage are listed here.
Failure to disclose information to the buyer puts the mortgage lender at risk for a lawsuit. Common late disclosed or non-disclosed information includes negative amortization, ARM terms and interest rates.
Secret commissions and kickbacks for giving business to certain lenders are generally illegal but do happen. Federally-related mortgage loans can receive no kickbacks per the Real Estate Settlement Procedures Act and can result in a lawsuit.
Investors have filed claims against mortgage lenders for loans declining in value due to early payments. Many of these investors from Wall Street have demanded the lender buy back the loans. This seems to be a holdover from the subprime bubble of 2008.
Yield Spread Premium
Dubious practices such as hidden fees have caused litigation for the mortgage industry. The yield spread premium is a common controversial fee seen in claims. This list is by no means exhaustive, but the mortgage company can protect its financial assets with indemnity insurance mortgage coverage. Errors and omissions happen even with the most diligent broker, thats where insurance comes in. Insurance helps during a lawsuit to protect assets and your reputation.