FRANKLIN BANK ACCESS LENDING DIVISION - OUR METHODOLOGY
Mortgage Banking Insurance Coverage

Mortgage bankers typically purchase fidelity/employee dishonesty coverage, mortgagee's errors-and-omissions insurance (E&O) and professional-liability insurance.

Types of Insurance

Mortgage Bankers Bond, i.e. Fidelity Bond, Crime Insurance and Mortgage Errors & Omissions Insurance

Minimum Coverages - Coverage limit as shown in Exhibit A (below) with either a double aggregate or a reinstatement of the aggregate limit

Franklin Bank Access Lending Division customer shall maintain, at its own expense, a blanket Fidelity Bond and Mortgage Errors and Omissions Insurance Policy, with loss payable to Franklin Bank, S.S.B. and with broad coverage from approved insurance carriers on all owners, officers, employees or other persons acting in any capacity with regard to a Mortgage Loan who handle funds, money, documents and papers relating to a Mortgage Loan. Any such Fidelity Bond and Mortgage Errors and Omissions insurance shall protect and insure Mortgage Banker against losses, including forgery, theft, embezzlement, mortgage errors and omissions and negligent acts of such persons.

No provision of this section requiring such fidelity bond and errors and omissions insurance shall diminish or relieve Mortgage Banker from its duties and obligations as set forth in the Master Repurchase Agreement.

Extensions of Fidelity Coverage - Fidelity Bonds must include:

Minimum Coverages - Coverage limit as shown in Exhibit A (below) with either a double aggregate or a reinstatement of the aggregate limit

Basic Coverage - A Financial Institution Bond must include fidelity insurance on all employees, independent contractors, temporary employees and leased employees, as well as owners/partners plus coverage for forged documents, premises and in transit, etc.

Extensions of Fidelity Coverage - Coverage must also include:

Mortgagee Errors & Omissions/Mortgage Interest/Mortgage Impairment

Coverage limit as shown in Exhibit A (below)

Basic Coverage - If you purchase a Form #15 Financial Institution Bond, since it does not cover Mortgagee E&O, you must purchase a separate Mortgage E&O policy.

This policy must cover exposures such as:

Professional Liability Insurance (optional)

Professional Liability coverage is like malpractice insurance for your business.

Basic Coverage - Professional Services Liability should cover your negligent acts, errors and omissions arising out of your professional services as a mortgage banker or mortgage broker. It should protect your legal liability from mistakes arising out of loan originating activities, including lock-in disputes, incorrect quotes, lawsuits, etc. It should also extend to assumptions, payoffs, foreclosures, renegotiation of loan terms, etc.

Additional Requirements

Insurer must include a rider that such insurance policies shall in no event be terminated or materially modified without 30 days' prior written notice to Franklin Bank, S.S.B.

Renewals and Policy Expiration Notices: Franklin Bank Access Lending Division customers shall provide Franklin Bank, S.S.B. with written evidence of renewal of such insurance policy 10 days in advance of the expiration date of such policy. A binder or certificate of insurance shall be valid proof of insurance. A binder or certificate is only acceptable for a 45-day period. After that time, Franklin Bank, S.S.B. requires a copy of the full policy including all riders/endorsements along with evidence of paid premium.

Approved Insurance Carriers: Each insurer must have and maintain at least the following Policyholder's rating of "A-" or better by either Standard and Poors (S&P) or A.M. Best Co. provided that an insurer with a lesser rating shall be permitted if such insurer presents a reinsurance agreement, containing a direct access clause, with one or more insurers which hold a policyholder's rating of "A-" or better.

Loss Payee: All fidelity bonds and mortgage E&O policies must have a Loss Payee provision naming Franklin Bank, S.S.B. as loss payee in the event of a loss involving their interest.

For more information, contact an Access Lending Division Trusted Advisor.

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