Lloyd's of London and Bankers Insurance Service will now offer errors and omissions insurance for Litigation Guard, an online system which performs compliance checks for non-QM loans.
The product comes as lenders become increasingly wary of compliance associated with loans made outside of regulatory standards for qualified mortgages, especially as more and more applications take place online.
Mortgages that meet QM requirements have more legal protection from liability related to ability-to-repay regulation than non-QM loans. Last year, a group of lenders
"Our company pioneered technology that reduces the biggest legal risk in non-QM lending," Litigation Guard chief executive officer Christopher Tiso said in a release. "Backing our product with innovative E&O insurance that is underwritten and placed by two pillars in the industry who have been insuring the mortgage lending industry for 60-plus years is the perfect complement to our product offering."
The insurance will be offered to both loan originators and investors. The online system established by Litigation Guard and Bankers Insurance already provides borrower education assistance to help protect against noncompliance in non-QM lending, with Litigation Guard providing third-party borrower assessment to help calculate credit risk.
Once the system has checked a non-QM loan for compliance, Lloyd's of London's E&O insurance applies. BIS is administering the insurance program.
