What Does Mortgage Banker E&O Insurance Actually Cover?

June 10th, 2022 by Sean A. Stephens, Esq., CMB®

What does Mortgage Banker E&O Insurance Actually Cover?What does Mortgage Banker E&O Insurance Actually Cover

Unfortunately, there is a common misconception that mortgage banker E&O insurance policies provide a broader range of coverage then they actually do.

In today’s video, I will break down what mortgagee E&O policies actually cover and discuss additional types of coverages to be aware of when you are applying for and renewing these all-important policies.

Now, if you have not yet done so, remember to take advantage of our complimentary 30-minute initial strategy call where we analyze your situation and discuss whether a banker transition process is right for you!

During this call, we will provide practical expertise and understanding of the process from mortgage licensing, investor approval and relations, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!

Call/Text: (714) 844-7146

First off, many lenders may think that their E&O policy covers a wide variety of potential claims, but unfortunately, they are sadly mistaken.

There are two types of E&O coverages for mortgage bankers:

  • Mortgagee E&O policies needed for GSE & warehouse bank requirements are limited to coverage for items such as failure to obtain or maintain insurance or pay real estate taxes.
  • A Professional Services Liability policy includes coverage for those negligent acts and errors and omissions which arise out of your professional services as a mortgage banker.

With that being said, many lenders make the mistake to think that this type of coverage applies to all aspects of the business, including repurchase requests.Does E&O insurance cover mortgage repurchase requests

However, it is important to note that most of these types of policies contain many exclusions within them and also may not cover contractual agreements such as repurchase requests, unless some type of negligence has been included as part of the claim.

In addition to mortgagee E&O, here are additional types of policies to be aware of:

  • Discounted Loan Loss: Provides coverage for where the loan has been sold and the seller is legally liable to purchase it back, provided the borrower is current.
  • Fidelity Bond: Employee dishonesty, theft, and fraud. Improper personal financial gain by an employee with intent to defraud employer.
  • Directors & Officers (D&O) Liability Insurance: protects individual directors and officers who are performing corporate duties for a mortgage banking firm against third-party lawsuits that arise from their role. Policies can cover legal damages and legal defense costs. This can be a recruiting tool for both attracting and retaining those key employees.
  • Cyber Liability: Protects the lender against theft, loss, or unauthorized disclosure of consumer’s personally identifiable non-public information along with other areas of protection.
    • Please note that this is an INCREASING AREA OF LIABILITY!

Remember to be proactive by reading your policies and understanding the definitions set forth by your carrier. At the very least you should consult with your current carrier or insurance broker regarding any coverage questions to determine extents of your coverage and where you may be at risk.how to become a mortgage banker

Now, wouldn’t it be nice if there was a mortgage banker blueprint available that would walk you through the steps on how to climb the mortgage banker ladder!

Well, that is where we step in to help with our practical expertise and understanding of the process from mortgage licensing, investor approval, warehouse bank selection, third party fulfilment providers, E&O and Surety bond companies, origination strategies, coaching, consulting, and more!

You can simply use our online scheduler to select a convenient consultation time and let us show you the Path to Prosperity!

Sean A. Stephens, Esq., CMB®
Broker to Banker Consulting, LLC
Call/Text: (714) 844-7146
Toll Free: (866) 989-0564 Ext. 419

Sean A. Stephens, Esq., CMB® 

Legal Disclaimer: The information provided on this blog does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. No representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, or availability to this information. Use of, and access to, this Blog or any of the links or resources contained within the site do not create an attorney-client relationship. Broker to Banker Consulting, LLC is not a law firm and does not provide legal services.

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