The current crisis in the lending industry, and specifically in the mortgage and sub-prime segments, will have some impact on the professional liability insurance business. Insurers could see claims from Directors & Officers policies and from professional liability (E&O) policies issued to mortgage brokers, escrow agents, appraisers and other real estate professionals. The question on underwriters minds is the order of magnitude.
Bracewell & Giuliani LLP has written an article (see here) that predicts a perfect storm for lender liability. While the article focuses on lender liability, to this we can add the smaller real estate professional should their prediction come true. Key points:
- A perfect storm is brewing that threatens the entire mortgage lending industry
- Defaulting and troubled borrowers will increasingly take aggressive postures by challenging foreclosures through affirmative consumer claims
The article provides three examples of litigation, and goes on to state:
Each of these recent events demonstrates the increasing risk that financial institutions, lenders, mortgage servicers, and others involved in the residential lending industry will face significant criminal, administrative, and civil liability
Not a comforting perspective for real estate professional liability underwriters.
Brought to you by Tennant Risk Services.
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