Insurance risk management: Developing a holistic real estate protection approach

The mortgage industry has experienced tumultuous shifts since and during the pandemic. Key changes have occurred from emergent forbearances to a frenzied housing market with high pricing and lower than average inventory, long build times for new construction, high levels of inflation and changing compliance standards and regulatory guidance. While early-stage delinquencies have remained stable, advanced delinquencies reached record highs throughout 2020, and in recent months have been decreasing once again, though they haven’t returned to delinquency levels seen prior to the pandemic.  This is a usual indicator of turbulence in property owners’ finances.

These market trends impact how lenders manage and mitigate corresponding risk. Mitigating the risk of uninsured or underinsured real estate has been a longstanding priority in the mortgage industry. The pandemic has called for expedited enhancements to mortgage risk strategies. Having a strategy in place for monitoring your real estates’ insurance also better prepares your financial institution for unexpected loss or shifts in the economy.

Protecting Property with Insurance Risk Management and Lender Placement
When a property owner does not purchase adequate insurance on their property, or allows a lapse of coverage, Lender Placed Insurance provides appropriate temporary coverage. This coverage is also known as force-placed insurance and is utilized by the lending institution to avoid loss while the property is under- or uninsured. Obtaining this type of coverage, and a possible premium charge to the borrower, should be considered a last resort after the borrower has been given multiple opportunities to acquire and provide proof of adequate insurance. Monitoring and tracking insurance can provide a more proactive stance for real estate protection. Accurate monitoring can identify unmitigated risk that exists on the portfolio, and can direct the appropriate actions, such as lender placement, to further reduce that risk.


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