Method for handling claims arising under representation and warranty insurance for mortgage loans
View Patent ↗An insurance program for entities in the mortgage industry that provides coverage for financial loss as a result of material inaccuracies in the financial information provided by or on behalf of the borrower. The insurance program preferably includes the initial insurance application and establishment of an insurance agreement, periodic issuing of individual insurance coverages for particular loans handled by the lender, training and consulting on improved controls for lenders, maintaining an ineligible database of entities and a database of loan information, and handling of claims. Handling of claims includes attempting to minimize the potential loss suffered as a result of a misrepresentation of information in a loan file when coverage under the insurance policy exists.
1. A method for processing a coverage request to an insurance entity made by an insured under a representation and warranty insurance policy using at least one computer, the method comprising:
receiving the coverage request resulting from a discovery of a financial misrepresentation of information in a loan file putting the insured at a financial risk of a loss where receiving uses the computer,
beginning a mitigation process for the coverage request,
reviewing the coverage request to determine whether controls were utilized by the insured in processing the loan as required in the insurance policy using the computer,
determining whether the insurance policy covers the coverage request where determining uses the computer, and
when coverage exists for the coverage request based on the review, performing the following using the computer:
continuing the mitigation process of the coverage request, and
paying a proof of loss relating to the coverage request up to coverage limits of the insurance policy when the proof of loss is presented.
2. The method according to claim 1 , further comprising:
assisting the insured to further refine controls to reduce the risk of a similar financial loss,
analyzing for trends with the computer based on the coverage request and similar coverage requests submitted previously, and
when a trend exists, performing at least one of the following
providing with the computer notification to insureds covered by the insurance policy, and
offering suggestions on how to improve at least one of controls and loan practices to at least one of counteract and take advantage of trends.
3. The method according to claim 1 , further comprising adjusting a premium modifier for the insured based on the coverage request review where the adjusting uses the computer.
4. The method according to claim 1 , further comprising:
identifying at least one insured for additional training based on at least one of the following using the computer: coverage request history trends, types of issues raised during review of loan files of the insured, and a recommendation of an adjustor that the insured needs training.
5. The method according to claim 1 , further comprising when the coverage request review finds insured collusion, denying coverage for the coverage request using the computer.
6. The method according to claim 5 , when there is no insured collusion, making a demand using the computer against at least one of the bond and the insurance of at least one participant in the misrepresentation.
7. The method according to claim 1 , further comprising notifying using the computer an insurance carrier of the coverage request so that appropriate reserves can be set.
8. The method according to claim 1 , further comprising attempting to recover the amount of the proof of loss through subrogation using the computer.
9. The method according to claim 1 , wherein reviewing the coverage request includes analyzing the coverage request and at least one loan file associated with the coverage request using the computer.
10. The method according to claim 1 , further comprising issuing a reservation of rights to the insured for the coverage request using the computer.
11. The method according to claim 1 , wherein the mitigation process includes
investigating whether an entity that originated the loan is capable of assisting in refinancing the loan,
investigating whether any entity that participated in originating, obtaining or closing the loan is culpable and capable of covering any financial loss associated with the coverage request, and
investigating whether the financial loss can be minimized by selling the loan to another entity at a discount below the loan value using the computer.
12. The method according to claim 1 , wherein the mitigation process includes
investigating whether an entity that originated the loan is capable of assisting in refinancing the loan,
investigating whether any entity that participated in originating, obtaining or closing the loan is culpable and capable of covering any financial loss associated with the coverage request,
investigating whether any entity that participated in closing the loan failed to follow instructions,
investigating foreclosure of the property subject to the loan, and
investigating whether the financial loss can be minimized by selling the loan to another entity at a discount below the loan value using the computer.
13. The method according to claim 1 , wherein determining coverage using the computer includes satisfaction of conditions of the insurance policy including the insured
using an ineligible list, and
using controls as required in the insurance policy during processing of the loan.
14. The method according to claim 1 , wherein the mitigation process includes
investigating whether an entity that originated the loan is capable of assisting in refinancing the loan,
investigating whether any entity that participated in originating, obtaining or closing the loan is culpable and capable of covering any financial loss associated with the coverage request,
investigating whether any entity that participated in closing the loan failed to follow instructions,
investigating foreclosure of the property subject to the loan, and
investigating whether the financial loss can be minimized by selling the loan to another entity at a discount below the loan value using the computer;
determining whether the insurance policy covers the coverage request using the computer includes
when the insured participated in the misrepresentation, finding no coverage,
when a source of the misrepresentation is excluded from coverage, finding no coverage, and
when controls of insured were not utilized properly by the insured, finding no coverage;
when coverage exists for the coverage request based on the review, beginning subrogation using the mitigation process when the proof of loss is presented;
when the coverage request is denied, allowing the insured to continue mitigation at the insured's expense; and
when an entity is culpable, adding the entity to an ineligible list using the computer.
15. The method according to claim 14 , further comprising:
assisting the insured to further refine controls to avoid and/or prevent a similar financial loss,
analyzing for trends based on the coverage request and similar coverage requests submitted previously using the computer, and
when a trend exists, performing at least one of the following
providing electronic notification to insureds covered by the insurance policy, and
offering suggestions on how to improve controls and/or loan practices to counteract and/or take advantage of trends.
16. The method according to claim 14 , further comprising adjusting a premium modifier for the insured based on the coverage request review where the adjusting uses the computer.
17. The method according to claim 14 , further comprising:
using the computer to identify at least one insured for additional training based on at least one of the following: coverage request history trends, types of issues raised during review of loan files of the insured, and a recommendation of an adjustor that the insured needs training.
18. The method according to claim 14 , further comprising notifying an insurance carrier of the coverage request so that appropriate reserves can be set using the computer.
19. The method according to claim 14 , wherein the mitigation process further includes obtaining a market valuation of the value of the property subject to the loan with the computer.
20. A method for processing a coverage request to an insurance entity made by an insured under a representation and warranty insurance policy using at least one computer, the method comprising:
receiving the coverage request resulting from a discovery of a financial misrepresentation of information in a loan file putting the insured at a financial risk of a loss where receiving uses the computer,
determining whether the insurance policy covers the coverage request using the computer including determining whether the loan file is covered by the insurance policy and whether the controls required in the insurance policy were utilized by the insured in processing the loan,
when coverage exists for the coverage request, performing the following:
beginning the mitigation process of the coverage request, and
paying using the computer a proof of loss relating to the coverage request up to coverage limits of the insurance policy when the proof of loss is presented, and
when coverage does not exist, informing the insured of the determination and offering the insured the use of mitigation resources at the insured's expense.
21. The method according to claim 1 , further comprising determining the value of the proof of loss with the computer prior to paying the proof of loss.