Mortgage Insurance Coverage

Stewart Title Guaranty Co.,[2018] O.J. No. 1872, 2018 ONCA 341, Ontario Court of Appeal, 9 April 2018, G.J. Epstein, D. Paciocco and I.V.B. Nordheimer JJ.A. The policyholder was a mortgage giver and mortgage thief. Looking for cover from the insurance company as part of mortgage insurance.

However, the insurance company refused cover on the grounds of an exclusivity provision which provided that "the income from the mortgage is payable to a different individual or body than the policyholder". Mortgages had been received by the policyholder's solicitor. However, the Court found that paying the legal counsel of the right owner of the policyholder is legally equivalent to paying the right owner of the policyholder.

Alternatively, there were ambiguities in the provision to be construed in favor of the insuree. Accordingly, the loss was indemnified under the insurance contract. The case was researched by Dionne H. Liu and first featured in the LexisNexis Harper Grey Administrative Law Netletter and Harper Grey Administrative Law newsletter.

Safeguard your mortgage insurance privileges now, before it's too late. Sure.

FHFA recently published changes to the mortgage insurance (MI) masthead policy requirement. FHFA has worked with the government-sponsored entities (GSEs), Fannie Mae and Freddie Mac, to review the MI Masters Policy requirement with the declared objectives of providing consistently and reliably MI coverage and to support the effort to provide coverage clearness, greater operating efficiencies and visibility in the mortgage markets.

In particular, the new MImaster policies are intended to enhance or resolve the various privileges and responsibilities of mortgage creditors and/or service providers in relation to certain frequently contentious matters between creditors and/or service providers and their mortgage insurance providers, such as harm reduction, claim handling and coverage exclusion. Unfortunately, these new types of directives may not offer the announced enhancements or added clarification.

Whilst many changes in the new MI Master' insurance contracts are customary among mortgage insurance companies, a number of remarkable variations could one day determine whether a particular credit is secured at the moment of drawdown or whether they could dramatically alter the costs and visibility of potentially disruptive litigation that may occur. Applicable law - which state or state law regulates a dispute under the Directive could impact the coverage or outcomes of a lawsuit.

A number of framework agreements in force stipulate that the applicable legislation is the place of the goods in question or the place of the initial policyholder indicated on the certification or declarations page. However, certain new MI Master Policies require that the laws of a particular State shall resolve all litigation under the contract, regardless of where the initial assured or affected ownership is situated.

Creditors and/or service providers should at least analyse the relevant legislation in relation to frequently contentious mortgage insurance matters. Compulsory Dispute Resolution - Certain new MI master contracts contain "binding" Dispute Resolution Regulations which require that all disagreements resulting from or related to the contract be resolved solely through a single procedure. These arbitrations may be governed by the terms of the arbitration agreement of the American Association ("AAA") or by JAMS in accordance with the Comprehensive Association rules and procedures.

It may also specify venues which are most likely to be in the vicinity of the mortgage insurer's domicile. Creditors and/or service providers should consider whether to negotiate referral proceedings at the discretion of the policyholder, as provided for in some framework agreements. Although rather personal, mediation is not necessarily cost-effective. Maintenance Manuals - "Maintenance Manuals" are mentioned in the new MI-Master guidelines, although they are not expressly integrated into or part of the guidelines.

However, because the guidelines require service personnel to adhere to service manuals, both up-to-date and later released, they are a mobile destination for service personnel and may implicitly alter the conditions of coverage. Creditors and/or service providers should consider pressing for an agency to regulate their service privileges and responsibilities for all mortgage insurance providers, rather than trying to adhere to the ever-changing service manuals of each mortgage underwriter.

Adequate Procedures - Certain new MI Master Policy models require Adequate Procedures to be initiated within six calendar days of delay unless the Mortgagor is otherwise instructed to do so by the Mortgage Insurance Company, or the Mortgagor is otherwise subject to a judicial order or suspension of payment. No exemption is mentioned from the six-month term under any other "applicable law" or for the active and diligent pursuit of losses reductions or borrowers training as we have seen in other new MI-Master Policies.

Creditors and/or service providers should not be penalised for attempting in good faith to meet all valid harm reduction standards. Neither should insurance cover be terminated due to alleged failure to initiate, conduct or terminate reasonable procedures, regardless of the duration of the failure. The fact that there are clear distinctions between the new MIMaster Policies indicates that there should be room for bargaining.

However, creditors and/or service providers must act quickly. The mortgage insurance companies plan to introduce their new MImaster policies soon. The Reed Smith Insurance Recovery Group can help assess and discuss potentially difficult terms in the new framework agreements before they come into force. We have a wealth of expertise in providing advice and support to major banks on mortgage insurance origin and service, and have successfully litigated with mortgage insurance companies on behalf of clients.

When you have received a copy of a new suggested masters policy and are interested in agreeing a cheaper preferred terminology or understand the questions posed by these new submissions, please refer to the creators of this notification or to the Reed Smith lawyer with whom you are working routine.