As a mortgage broker, you want to have errors and omissions (E&O) coverage customized to cover your unique risks. Realize that you could be at risk for your past loan transactions as well as any loan transactions you’re currently engaged in. It can be a difficult chore ensuring compliance with corresponding lenders, and your business needs to have much more than just any simple generic E&O policy.
There are many reputable companies that provide errors and omissions insurance for mortgage brokers and mortgage bankers. Depending on your particular concerns, and there are brokers who offer all types of residential and commercial loans, including hard money loans and reverse mortgages, so there’s a policy that will fit you perfectly.
The difference between mortgage brokers and bankers
Mortgage brokers and mortgage bankers perform essentially the same tasks, the only major difference between the two is that mortgage bankers provide the funds for the loans they make while mortgage brokers do not use their own funds. Brokers act solely as the intermediary between the lender and the borrower. Mortgage brokers also have access to multiple lenders, offering their customers several options, while mortgage bankers typically offer only their own loans.
As a mortgage broker, you can be sued for a variety of reasons regarding issues that can occur during any real estate transaction, even when no error or omission was actually made. This is typically the case in situations where a lawsuit involves the plaintiff naming all parties in a real estate transaction, including the real estate broker, the title company, the escrow company, and you, as the mortgage broker.
Whether a lawsuit is justified or not, you could face costly litigation along with the possibility of having to pay significant damages. In any case, it is vital to have the proper insurance for mortgage brokers because the policy provides you with such valuable protection.
Since policy exclusions can vary significantly between insurance companies you should review any E&O policy under consideration fully, including all exclusions and endorsements, to make sure that you are being provided with the appropriate coverage.