Lenders Misrepresentation Insurance
30% of all Mortgage Originations Contain Some Misrepresentation
The residential mortgage market is one the largest, most significant financial markets in the United States. The Federal Reserve calculates that there are $10.6 trillion worth of home mortgages already in place in this country, with more than $1 trillion of new mortgages created every year. Yet law enforcement and industry observers estimate that 30% of all mortgage originations contain some misrepresentation. Even with the best fraud-detection and protection processes in place, this represents a significant risk exposure not just to the mortgage banking industry, but to the entire financial system. LMI is a powerful risk-transfer tool that can protect lenders, investors and the entire mortgage pipeline. LMI protects lenders from the financial damage of a repurchase demand – a requirement that they buy back any loan sold to an investor in the event the borrower’s loan file is later discovered to contain material financial misrepresentation.
Reduce Counterparty Risk
LMI protects investors from the administrative and reputational damage of having to process a repurchase demand. It smoothes counterparty relationships and protects against counterparty risk in the event of a material financial misrepresentation. It may also provide significant credit enhancement when the investor sells or securitizes those loans. LMI can protect the entire mortgage pipeline by ensuring the integrity of the borrower representations of each loan as it enters the financial system, potentially lowering counterparty risk and raising credit quality.
Exclusively Sold Through Bakerjian Insurance Services
ProSight chose Bakerjian Insurance Services (BIS) as our exclusive national program manager for LMI because of their expertise. The principals of BIS are experienced insurance industry veterans, have experience with many of the largest insurance companies in the world and have focused on mortgage banking and mortgage fraud for more than a decade. Lenders Misrepresentation Insurance from BIS and ProSight is innovative for its simplicity, for its effectiveness and for its responsiveness to market needs.
