Method for Determining Premiums for Representation and Warranty Insurance for Mortgage Loans

Abstract

An insurance program for entities in the mortgage industry that provides coverage for financial loss as a result of material inaccuracies in the financial information provided by or on behalf of the borrower. The insurance program preferably includes the initial insurance application and establishment of an insurance agreement, periodic issuing of individual insurance coverages for particular loans handled by the lender, training and consulting on improved controls for lenders, maintaining an ineligible database of entities and a database of loan information, and handling of claims. The periodic issuing of individual insurance coverages includes receiving production information from the lender and determining the premium for the production information based at least in part on the insurance agreement. In at least one embodiment, the periodic issuing of individual insurance coverages includes scrubbing production information against databases as part of determining which loans on which to calculate the premium. The insurance program also includes a methodology for lender processing of new mortgage applications.

I claim: 
     
         1 . A method for determining an insurance premium for a group of loans for a particular time period handled by a lender covered by a representation and warranty insurance policy, the method comprising:
 making available to lenders at least one database containing at least one of an exclusionary list and loan data,   receiving production information for the group of loans for the particular time period from the lender,   receiving identification of which loan segments of the group of loans for which the lender is requesting coverage under the insurance policy,   scrubbing the received production information against the at least one database for matches, when a match occurs for a particular loan, performing the following
 notifying the lender that a match occurred for the particular loan, and 
 excluding from coverage at least the reason for the match, 
   setting a premium for each covered loan in the group of loans based on pricing from the insurance policy,   notifying the lender of the premiums for the group of loans, and   collecting the premiums from the lender.   
     
     
         2 . The method according to  claim 1 , wherein when a match occurs for a particular loan, excluding the entire loan from coverage. 
     
     
         3 . A method for a lender to utilize an insurance program providing representation and warranty insurance from an insurer, the method comprising:
 receiving a mortgage application,   reviewing and underwriting the mortgage application,   obtaining an appraisal of the property to be subject to the mortgage,   scrubbing information from the mortgage application against the contents of at least one database provided by the insurer, the at least one database includes an ineligible list, and   approving or denying the mortgage application,   when the mortgage application is approved, performing the following:
 transmitting closing instructions to a settlement agent, 
 submitting production information including the closed mortgage to the insurer for insurance coverage, and 
 selling the mortgage to an investor. 
   
     
     
         4 . The method according to  claim 3 , wherein scrubbing includes
 comparing at least one participant in the mortgage application process and closing to the contents of the ineligible list,   when a match occurs, determining whether to deny the mortgage application or accept risk of a financial loss on any mortgage that results from the mortgage application.   
     
     
         5 . The method according to  claim 4 , wherein scrubbing includes
 accessing a loan database provided by the insurer, and   comparing information from the mortgage application to the contents of the loan database,   when a match occurs, determining whether to deny the mortgage application or accept risk of a financial loss on any mortgage that results from the mortgage application.   
     
     
         6 . The method according to  claim 3 , further comprising addressing the any matches resulting from scrubbing information from the mortgage application prior to approving or denying the mortgage application, and
 wherein scrubbing information includes using a fraud detection tool.