The importance of protecting the bank’s collateral is indisputable. Tracking insurance is a big part of a lender’s administration work. There are renewal notices, cancellation notices, payment notices, and mortgage customers who change insurance companies. Someone has to watch what is going on.
The mortgage errors and omissions policy mentioned in another section of this website covers the bank when tracking fails and an insurance falls through the cracks.
More and more banks are considering outsourced tracking services — usually from the organization that provides the forced-placed insurance.
As I write this, there is a great deal of concern over the forced-placed insurance business and changes required by various bank regulators and regulations. Premiums charged by banks when they place insurance coverage for a customer are under scrutiny. Tracking services and the fees charged (or not charged) to banks for services are a part of what regulators are looking at.
Regulators seem to see the premiums charged to mortgage customers who fail to meet their mortgage terms by buying insurance as a profit center for banks. Insurers and agents who provide the forced-placed coverage are seen as gouging insureds. Regulators are looking at all aspects of the transaction to see where and if banks are making profits on these policies or realizing reduced expenses by allowing insurers to track policies.
