Mtg Blanket Ins. -Affiliated Business Agreement?

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Question:

Our bank recently decided to purchase Mortgage Blanket Insurance to use in event borrowers lapse on their hazard insurance on a mortgage the bank has secured as collateral so that the bank will have coverage for the ownership interest of the real estate. This insurance is obtained through an insurance agency which is a subsidiary of the bank. The borrowers of course will not be incurred a charge for this. Are we required to provide an Affiliated Business Arrangement? Is there any other requirement that we must do for this?

Answer:

You will have to review your bank's policy, but usually the customer must provide evidence of insurance at closing as usual. This blanket coverage is there to insure the bank in the event that the customer allow that to lapse post-closing and therefore does not affect initial disclosures.

First published on BankersOnline.com 1/28/13