Mortgage indemnity insurance

potatoefeet66

Hi is a mortgage indemnity insurance active for duration of mortgage. As lender advised I took out an indemnity insurance to cover a 45k + in income shortfall for mortgage of 150k. 

Does this cover lender loss in event of defaults or repossession.

thanks in advance 

ACG

You took out an insurance policy because your income was not enough? 
When was this? 

Assuming that is the case, the policy protects the lender. But the insurer may come after you for their losses. 

dunstonh

Hi is a mortgage indemnity insurance active for duration of mortgage. As lender advised I took out an indemnity insurance to cover a 45k + in income shortfall for mortgage of 150k. 

MIG is for the duration of that mortgage whilst it is with that lender on that deal.   It may or may not be ongoing if you stay with the lender but buy a new deal.  It wont be ongoing if you remortgage to another lender.

Does this cover lender loss in event of defaults or repossession.It covers them for unrecoverable losses.   However, they are still required to recover as much as possible and then the insurer can come after you for anything the lender hasn't managed.  Ironically, many banks used it to self-insure. Meaning they are also effectively the insurer.

DullGreyGuy

dunstonh said:
Ironically, many banks used it to self-insure. Meaning they are also effectively the insurer.

If it is true self insurance, rather than what this forum often refers to as self insurance, then it would give them access to the reinsurance market which can be more tax and capital efficient. They can reinsure across portfolios of mortgages with a stop loss for example so dont pay insurer profit margins etc on the inevitable losses but ensure they arent exposed to any spikes in losses. 

potatoefeet66

Thanks , it was definitely self insured by lender as no fees were payed.... I guess a valuation fee upon application would require lender to check LTV criteria was satisfied. Thereby removing need to insure.