Home Equity Lines of Credit and Second Mortgage loans have far too long been unprotected and have now created massive amounts of risk and fraud for banks. What do banks do to protect themselves against this? Quite often, not that much although they may think they are.
HELOC loans are on the rise and so is HELOC FRAUD.
Until recently, there were not many ways a lender would be able to truly protect themselves as well as any of their shareholders from this type of fraud. What I have seen lenders do to attempt to avoid issues are the following:
- Lenders would do nothing regarding checking a property for liens or protecting from fraud and recording errors (Scary).
- Lenders would simply order a search on the property, review it, but have no further protection from fraud, undisclosed liens, or recording errors.
- Lenders would order a costly junior loan policy from the title insurance company.
Which does your company do?
If you are doing any of the above then there is a better solution now available in the market.
The biggest banks and HELOC providers in the country are using it as well as over 600 smaller banks and credit unions…….and there is a reason. The program has paid over $75 Million in fraud claims so far.
HELOC Protection, Done the Right Way
First, we start with a property report. The report contains the same standard information as a typical property report, but the report carries an enhanced E&O coverage. This coverage is up to $500,000 per report. Loan requirements and program features:
- FICO score of 600 or higher.
- CLTV cannot exceed 100% (unless approved by the insurance company).
- Offers complete protection against borrower fraud and loan recordation issues
- Flat fee pricing on a national basis.
- Lender’s staff responsible for clearing all un-discharged liens
- Only insured for errors and omissions and may only carry $1000 – $15,000 worth of coverage
- Lender can wait 3-4 days for delivery of report
- Multiple vendors supplying these reports making billing reconciliation more difficult and time consuming
- Lender must pay for report regardless if the loan closes or not.
Paradigm Home Equity
- Property reports delivered typically within 24-48 hours
- Paradigm HE covers lenders up to $500,000 per report against borrower fraud, identity theft, errors and omissions in recording and undisclosed liens
- All property reports performed by vendor on a national basis, improving efficiency
- Insurance only applies to closed loans
Home Equity Insurance Coverage Information
- Coverage provided by insurance company with an AM Best rating of A Excellent.
- E&O policy offering coverage from time of loan application through recordation. There are no “gaps” in the coverage.
- Up to $500,0000 per mortgage agreement with no aggregate limit of liability.
- Coverage follows the mortgage agreement and can be assigned to investors.
- Federal Home Loan Bank accepts policy by way of assignment.
- Term can be up to 30 years (cost varies)
- Covers 1-4 family residential properties, condos, and investment properties.
- No borrower affidavit required.
- Foreclosure is not required for claim submission.
Contact us for more accurate pricing and workflow design for your specific needs.