Insurance for Mortgage Brokers
Mortgage companies are financial institutions that lend funds for purchases of residential and business real estate. The mortgage is paid back over time with interest until the loan is paid off and the purchaser owns the property. If the loan is not paid back, the mortgage company or loan purchaser can foreclose on the loan and sell the property to recoup their investment.
Some mortgage companies also service escrow accounts, may be involved in real estate services and transactions, or broker and sell mortgage loans to other operations.
Recommended Insurance Programs for Mortgage Companies
Minimum recommended coverage:
• General Liability
• Errors and Omissions (Professional Liability)
• Property Insurance
• Hired and Non-Owned Auto (full commercial auto if vehicles owned)
• Commercial Crime Coverage
• Business Income with Extra Expense
• Workers’ Compensation
Other coverages to consider for Mortgage Brokers:
Business Personal Property, Extra Expense, Financial Institutions Bond, Accounts Receivable, Computers, Valuable Papers and Records, Directors’ and Officers’ Liability, Employee Benefits, Umbrella Coverage, Computer Fraud, Extortion, Cyber liability Insurance (Data Breach Coverage), EPLI, Mortgage Errors and Omissions.
Common Insurance Risks and Needs Associated with Mortgage Brokers
General Liability Insurance
Mortgage office GL exposure is limited if the mortgage company carries out all transactions over the phone or at the client’s business, home or other locations. If clients do come to the premises, the condition of the area open to the public is a prime concern as visitors may be injured from slips or falls. Floors need to be in good condition, with steps and uneven floor surfaces prominently marked. Emergency lighting, well-marked exits, and proper egress, as well as interior and exterior security while going to and from the premises, are important.
Parking lots and sidewalks need to be in good repair with snow and ice removed, and generally level and free of exposure to slips and falls. There should be security in the parking lot equal to or better than the surrounding premises.
Personal injury exposure arises from breaches of customers’ privacy and confidentiality of their financial records.
E&O Coverage (Professional liability Insurance)
Mortgage broker errors and omissions exposures are possible during any mortgage transaction. There should be checks and balances in place to quickly catch and fix errors that are made. The background and training of all professional-level employees must be thorough and continual. Monitoring is critical. In servicing mortgages, the mortgage company must verify that all mortgaged properties have hazard insurance. A mortgage errors and omissions policy provides blanket coverage for any inadvertent omission.
Directors’ and officers’ exposure for mortgage companies can be substantial due to competing priorities of numerous stakeholders such as stockholders, bondholders, depositors, employees, and regulators. Directors and officers are more likely to be sued for results of their decisions in times of economic downturn and well-publicized excesses within the financial services industry.
Mortgage companies may offer escrow fund handling and other financial activities. Directors and officers can be sued if funds from any of these are mismanaged. Officers must be thoroughly knowledgeable about the mortgage lending business, able to operate competitively while maintaining profitability, and able to oversee ongoing operations effectively. Directors should include representation from a wide variety of business interests with no conflicts of interest.
Property exposures are primarily from fire due to the electrical wiring for computers, printers and other electronic office equipment. All wiring within the company building should meet current codes and be adequate for the company’s operations. Some equipment will have circuitry easily damaged from smoke, water and heat, which will cause a total loss even with a small fire. Business and extra expense coverage should be considered as the company must continue operations after a loss.
Commercial Auto or Hired and Non-Owned Coverage
Automobile exposures is typically limited to hired and non-owned auto for employees using their own vehicle while running errands or conducting work-related activities. If the company provides vehicles to officers or key employees, full coverage auto policies should be purchased and company use policies and procedures should also be put in place for personal and permitted use of the vehicles. Any driver must have a valid driver’s license and MVRs must be run regularly. Ongoing maintenance should be documented.
Commercial Crime Policy
Crime risks for mortgage lenders is primarily from employee dishonesty, either from theft or from improper transfer of funds held for customers. Mortgage companies need a Financial Institutions Bond (Mortgage Broker Bond) to cover this and other crime exposures. Background checks should be conducted for anyone who will have access to the accounts. There should be regular monitoring and auditing of the books by outside auditors to prevent and identify problems- This is typically required by the insurance company issuing the mortgage bond.
All employees should be required take at least one continuous week of vacation a year. Controls and programming to prevent computer fraud should be reviewed. Extortion is another growing concern for mortgage lenders due to the high value of assets held by mortgage companies.
Inland marine exposures exist from accounts receivable, computers and valuable papers and records. Backup copies of all records, including computer records, should be made and stored off premises for ease of restoration in the event of a loss.
Workers compensation exposures is limited but often required by state laws. Mortgage companies are generally less visible and less attractive for holdups than other financial institutions. Clerical employees are exposed to repetitive motion and carpal tunnel syndrome. All workstations should be ergonomically designed to reduce the chance of such injuries.
Business Liability Quotes for Mortgage Brokers
General Liability Shop.com offers affordable liability insurance quotes for Mortgage Brokers throughout the U.S. Our Mortgage Lender programs include professional liability and all other lines of business insurance, as well as our Target programs for business owners policies (BOP). Contact one of our business insurance Specialists today at (800) 900-8657, or start a quote online now.
Our Top Carrier Solutions for Mortgage Brokers
Mortgage Broker Liability Classification Codes
Commercial insurance companies use various liability classification systems in order to classify and rate coverage premiums for XXX. Here are the most common business insurance classification for XXX:
Business Liability Category: Financial Institutions
SIC Business Insurance Codes:
• 6162- Mortgage Bankers and Loan Correspondents
• 6163- Loan Brokers
NAICS Liability Classifications:
• 522292- Real Estate Credit
• 522390- Activities Related to Credit Intermediation
• 522310- Mortgage and Non Mortgage Loan Brokers
Business ISO General Liability:
• Code: 61223- Banks and Other Financial Institutions
• Code: 61226- Office- Other Than Non-Profit
• Code: 61224- Office- Building Occupied by Business Employees
Common Workers Compensation Class Codes:
• 8810- Office and Clerical
• 8772- Outside Sales and Messengers