Mortgage Brokers Errors & Omissions (E&O) Liability Insurance can provide coverage for your company in the event of a lawsuit brought against it for claiming negligence in providing or failing to provide your professional services. Below are the most common claim scenarios.
Failure to properly qualify a lender who subsequently was delinquent. - An individual was given a second mortgage on her home to pay off credit card debt. Within one year, the plaintiff was back in debt and could not pay the new credit card debt, the first or the second mortgage. After seeking the advice of a credit counselor (suggested by the mortgage broker), the Plaintiff sued because the mortgage broker should have known her history and that she would have been unable to pay. Payout of $27,000 plus legal fees.
Failure to properly advise a client of risks and age discrimination. - A mortgage broker convinced an elderly couple to refinance a shopping center at a slightly higher fixed rate than they were currently paying because interest rates were on the rise. The client paid a locking fee of $300,000 on the mortgage and the loan was to be converted from non-recourse to a recourse loan. Family members halted the transaction and alleged bad faith and discrimination. Because of the amount of time that transpired in litigation (interest rates increased and a major tenant left) they were no longer were able to refinance at a good rate. The potential loss was in excess of $5,000,000.
Failure to properly review loan documents. - A mortgage broker obtained loan documents from a prospective borrower. The documents, including bank statements and tax returns were forged. The borrower defaulted and the bank alleged the mortgage broker was negligent by not validating bank statements and other documents provided. Given the drop in the market prices of real estate, this case has the potential of costing over $300,000 plus legal defense.