Loan Protector Helps Lenders Cope with Added Pressure
With increased regulatory scrutiny of loan servicing practices, companies such as LoanProtector Insurance Services that provide insurance tracking services are refining their businesses to meet increased demand.
Ron Wiser, president of Loan Protector, said that regulatory pressure and litigation threats are changing the environment for tracking and lender-placement of hazard insurance.
"Really, what has happened is that the standards of care have been moved higher by some recent rulings from the FTC," he said. The FTC in the past year has reached settlements with several mortgage servicers related to allegations of improper practices, including charges related to force-placement of insurance.
He said servicers should be familiar with the settlements that lenders have entered into with the FTC.
"While they are not actually regulations, they are in a sense precedents that a mortgage servicer needs to be aware of," Mr. Wiser told Mortgage Servicing News.
One thing lenders or their insurance tracking vendor need to do is investigate claims, especially verbal claims made by a borrower over the phone, regarding the existence of insurance coverage, he said. That helps to avoid the force-placement of duplicate insurance.
Sometimes borrowers give lenders inaccurate information about insurance coverage just because they are not experts in insurance industry terms and are not familiar enough with their coverage to provide the right information, he said.
The insurance industry is largely regulated by state law, and regulations affecting lender-placed coverage therefore vary widely.
"The major new issue is that a lot of states are now addressing minimum requirements for corresponding with the borrowers about whether they have hazard insurance in place or not," Mr. Wiser said.
He said lenders face a host of rules and regulations from individual states, the federal government, and mortgage investors that affect lender-placement of coverage. Just monitoring changes in those rules and in loan documents is a challenge, he said. Then a lender or insurance tracking firm can decide what steps are appropriate for an individual company's portfolio. He said the insurance tracking industry provides a benefit because of the increasing complexity of the regulatory environment and the investment in technology that is necessary to achieve economies of scale.
Recently, Loan Protector added an escrow department to its operations. The new department is dedicated to researching, processing and verifying insurance documents for escrowed and impounded loans serviced by Loan Protector.
The company has more than 95 electronic interfaces with major insurers, as well as interfaces with major loans servicing automation systems such as Fidelity MSP, Financial Industry Computer Systems, McCracken and MortgageServ.
Mr. Wiser said the new department's sole focus is on processing issues related to escrowed loans. He said the company looks at the escrow issues as an extension of tracking the insurance coverage.
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