CUNA Mutual Group, a Madison, Wis., provider of insurance and other services to credit unions, has rolled out what it believes to be that industry's first insurance against losses from fraudulent documentation provided for mortgages.
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 credit union member seeking to buy a home alters documents to present his employment status in order to secure a mortgage loan beyond his means. Eight months later, after the member defaults on his payments, the credit union discovers the fraudulently altered documents. The credit union is forced to foreclose on the property and incurs a loss.
The coverage is underwritten by CUNA Mutual's CUMIS Insurance Society Inc. unit.