A World First, Borrowers Mortgage Insurance (BMI)
Making Home Insurance Risk Visible for Lenders
An exponential growth in under insurance risk banks can't see
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Lenders Monitored Home Insurance (MHI)
Most lenders have a covenant in their loan agreement that requires the Borrower to always have mandatory house insurance. At loan settlement the Borrower is required to provide the lender a Certificate of Currency of home insurance. Lender’s rarely if ever check to ensure Borrowers maintain home insurance. The administrative cost to do this would be significant and probably cost prohibitive. The result is more than 30% of all Borrowers are in breach of their home loan covenants by not having home insurance.
In a cost-of-living crisis there are numerous industry reports confirming the exponential growth in Borrowers failing to insure their home. This significantly increases the risk of the underlying asset that supports the home loan. It might also have a material impact on the value of the securitisation of a lenders loan book.
We address this risk by offering a Monitored Home Insurance (MHI) policy with our BMI. This policy is competitively priced and paid monthly in advance like BMI. Our payment system reminds customers of upcoming payments and red flags any defaults. We offer our Lender clients a subscription-based service that provides a monthly report on all their loans insured through us. This will, for the first time, provide lenders with an accurate and current state of all their borrowers. It will identify slow or defaulting borrowers and provide a line-of-sight to a CRO of potential problem Borrowers and a real time view of the insurance risk across their whole portfolio.
Industry Insights
Surging insurance costs are driving thousands of borrowers to breach their mortgage contracts - ABC News 10th Dec 2024
Close to 200,000 households are either already breaching their mortgage contracts, or risk doing so, as the surging cost of home insurance forces many to dump their policies.
The report he co-authored estimated banks were owed around $57 billion in outstanding loan balances by those 180,000 borrowers as of March 2024, representing 3 per cent of all home loan assets, which Mr Paddam described as "a very significant number" that should send alarm bells.
HOME INSURANCE AFFORDABILITY WORSENS IN AUSTRALIA – Actuaries Institute - 26th August 2024
Mr Paddam said: "These 180,000 households with home insurance affordability stress represent about $57 billion worth of home loans."
Betting the house – Australia Institute - May 27th 2025
Mortgages on underinsured homes are worth a total of $88.5 billion, while those on uninsured homes are worth $30.1 billion. This amounts to nearly $119 billion in mortgages on inadequately insured owner-occupied properties.