Written by Dennis Swit, as originally published in The Reverse Review.

Lender-placed insurance has been a hot topic in the press lately and most of the publicity has been negative. Based on what has been written, it’s easy to see why demands are being made to change to a product that is critical to protecting the mortgage industry and the borrowers it serves. Public opinion might change if it were known that:

1) Each mortgage agreement requires the borrower to maintain homeowner’s insurance.

2) When it is determined that a borrower has failed to maintain coverage, numerous letters are sent and phone calls are made to the borrower in an effort to secure evidence of insurance. The borrower’s last known insurance agent/carrier is also contacted.

3) If after 60 days the borrower has failed to produce evidence of insurance, the servicers issue lender-placed insurance to protect themselves and their investors’ interest in the

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borrower’s property.

4) If the borrower produces evidence of insurance after lender-placed insurance been issued, coverage will be canceled and any unearned premiums refunded.

In conclusion, if more were

known about the exhaustive attempts that are made by servicers to get their borrowers to comply with the insuring requirements of the loan, maybe less noise would be made about this invaluable tool used to protect the mortgage industry for uninsured loss.