MADISON, Wis. – CUNA Mutual Group rolled out what it believes to be the credit union industry’s first fraudulent mortgage loan documentation coverage.
The Fraudulent Mortgage Loan Documentation coverage will apply to material misrepresentations, through alterations by the borrowers, on certain residential mortgage lending documents used by credit unions to make lending decisions. These include verifications of income and employment, offers to purchase and/or appraisal reports.
Under a typical loss scenario, a member seeking to purchase a home alters documents to represent her employment status in order to secure a mortgage loan beyond her means. Eight months later, after the member defaults on her payments, the credit union discovers the fraudulently altered documents. The credit union is forced to foreclose on the property and incurs a loss.
FMLD is part of CUNA Mutual’s bond program, which is underwritten by CUMIS Insurance Society, Inc., a company of CUNA Mutual Group.
