London & European, a provider of services and solutions designed to enhance the speed, simplicity and security of property transactions, has unveiled an insurance policy for lenders designed to cover performing loans and guarantee their securitised portfolios.
Until now, title insurers have been unable to prove the financial benefits of title insurance, instead focusing on the upstream benefits of accelerating the lending process. Now, this new breed of title insurance policy provides the certainty, assignability and clarity in order to guarantee the further downstream benefit of security that can guarantee lenders portfolios.
Alan Smith, managing director of L&E, says: “With the emerging dominance of sub-prime lenders, and the resulting explosive growth in residential mortgage backed securitisation, theres now a pressing need for increased security to protect those lenders bond values.
“Where a mortgage lender has failed to secure a loan, or secure with the correct priority, and is unable to sell or securitise the asset, then our policy will cover the consequential loss associated with the failure to operate their funding model. This now provides a true guarantee rather than simply an indemnity, and is a totally innovative application of title insurance.
“By insuring and guaranteeing the reliability of lender income, title insurance protects the value of lenders bonds, making them a far more attractive proposition for the capital markets, while at the same time giving lenders the flexibility to take on more business and grow their profitability.”
Most specialist or sub-prime lenders now operate revolving warehouse funding facilities that are periodically refinanced through the issue of mortgage-backed securities on the capital markets. The value of residential mortgage backed securities increased from 5bn in 1997 to 77bn in 2004 a 48% increase per annum.
In addition to all the traditional benefits of title insurance, the all-inclusive lender policy from L&E includes a clear plain English policy with wording thats better aligned to meet the needs of the capital markets, a six months cure or pay guarantee, and full assignability as the policy is attached to the loan not the lender.
It also includes a clear claims guarantee claims are guaranteed for proof of loss, not proof of fault, and a secure A-rated insurance capacity from AXA.