The Mortgage Company Professional Liability (MCPL)

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The Mortgage Company Professional Liability (MCPL) policy protects against possible losses from suits mainly in the area of loan origination. This can include the loan application process, loan processing, underwriting, closing, Secondary Market sales, servicing, and loan foreclosure. The Stateside Professional Liability Policy covers a firm’s legal liability for wrongful acts made in providing professional services performed as a mortgage banker or mortgage broker.

Certain Third party Liability suits which may be covered could arise from the following areas:

• Secondary market sales (optional)

• Servicing (optional)

• Loan origination

• Loan processing

• Underwriting

• Closing to mortgagors

• ARM loans

• Certain disputes over the loan application

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Practical examples of some claims that our underwriters have defended or paid a loss for include claims involving allegations such as:

• Discounted Loan Loss resulting from a loan sale after correcting a covered error for a loan (optional coverage and the broker must request this coverage)

• Equity Stripping Allegations

• Allegations of negligence in making a loan

• Allegations of unauthorized activities with regards to a loan

• Failure to supervise employees

• Wrongfully Distributing Funds

• Allegations of Usury Rates

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The policy does contain certain limitations that may limit coverage depending on the specifics of a professional liability claim and of course the policy wording and endorsements determines coverage. Nothing here is meant to convey that the above claim examples or suits are automatically covered, but they are intended to demonstrate some claims we have seen.

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The Mortgage Bankers Bond (MBB)

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The Mortgage Bankers Bond (MBB) was developed for Mortgage Companies and provides Fidelity Crime Bond Protection. Employee dishonesty and Investor Required "E&O" are the two key coverages required by most "Investors", but the bond also includes forgery protection, transit loss protection and other coverages.

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• Fidelity Coverage for loss from employee dishonesty as well as from closing attorney agent, can also cover Independent Contractors and/or Servicing Contractors.

• Coverage for theft of mortgage investors and warehouse lenders money or collateral as required by Fannie Mae, Freddie Mac or Ginnie Mae satisfying industry standards and most mortgage investors requirements.

• Coverage includes specified Investor required Errors and Omissions coverage mostly related to servicing the loan; even though some mortgage bankers do not service loans, this is often still required by most Loan Investors such as Fannie Mae, Ginnie Mae, Freddie Mac and others.

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Note that a professional liability policy cannot normally provide this coverage as the coverage requires first party protection in certain cases and most professional liability policies only protect against third party law suits.

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Mortgage Banker and Mortgage Broker Insurance Discussion

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This discussion provides an overview of the mortgage banking and mortgage brokering industry by highlighting the distinctions between mortgage holders errors and omissions, mortgage impairment, forced placed coverage, mortgage banker bond, mortgage banker E&O, and custodial errors and omissions (custodial E&O). » View the full article

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