Within the insurance policy in a mortgage, there is a Midland Mortgage clause. Knowing what this means is absolutely crucial.
According to national and federal state regulations, every house must be insured. That includes houses that are on mortgage. There is a legal implication for this regulation, both for lender and mortgagor. In this particular article, we will be discussing Midland Mortgage clause. Knowledge about this case is very important.
What is a Mortgage Clause?
If you are still new and unfamiliar with mortgage, you may not know about mortgage clause. This aspect is actually very important in any mortgage loan since it affects customers.
Mortgage clause of Midland is not different than mortgage clause in any other institution that originates mortgage loans for consumers. This clause is a part of one property insurance policy. It states that in any claimable case that involves damage in the property, mortgage lender has the right to receive insurance claim alongside mortgage borrower. This clause is usually attached to the insurance policy file.
Why is this clause added into the insurance policy? As you know, mortgage lender invests into the property by providing loan to the mortgagor. In the case when something happens to the house, mortgage lender would want to protect their investment. This is why the clause is added into the property’s insurance policy.
In What Cases the Midland Mortgage Clause is Applied?
By law, there are certain cases in which Midland Mortgage clause will be applied. Here are some situations in which lender will be given compensation. Knowledge about this matter is important.
1. Borrower Experiences Financial Hardship
We never know what will happen during the course of one’s mortgage term. Borrower could experience financial issues which render them incapable of paying the monthly bill required. In such case, both lender and mortgagor are at disadvantage. Lender will not receive their rightful money at the right time. Meanwhile, mortgagor or borrower is at risk being claimed to default from their loan and losing their home.
This particular case is covered by private mortgage insurance. Borrower is the one who is responsible to pay for the insurance premium every month until certain number has been reached. The clause is there mainly to protect lender from not receiving their supposed payment.
2. Government Insured Loan Cases
There is a Midland Mortgage clause for the case of government insured loans too. There are three types of such loan: VA loans, USDA loans, and FHA loans. These loans are significantly easier to obtain in comparison to conventional loans. People with credit score lower than 580 (which is the standard of conventional loan requirement) are eligible to obtain these loans.
When lender provides government insured loans, the institution takes higher risk than in conventional loans. The mortgage applicants do not exactly have stellar credit history; they can even be past delinquents. In addition to that, they only pay small down payment amount. The clause protects lender in the case of default in borrowers’ ends.
3. Cases of Down Payment Lower than 20%
Midland Mortgage also takes risk in mortgage loans with down payment under 20%. In order to protect lender’s investment, borrower must pay insurance premium to deal with issues like financial hardships and defaulting from the mortgage loan. This is where the Midland clause is applied.
In this type of insurance, borrower is expected to pay for the insurance premium until the principal balance reach 20%. Once that number is hit, there is no need to continue with the insurance payments. In some cases, the premium is even shared between lender and borrower.
4. Damage on the Property
There is also a Midland Mortgage clause for damage on the property. In addition to mandatory private mortgage insurance, homeowner or mortgagor is suggested to apply for property insurance. It is done to protect borrower and lender’s asset, which is the property. During the course of mortgage term, it can be said that lender also owns its share of the property.
When property experiences damaged as stated within the home insurance policy, lender and borrower will be compensated. Of course, the insurance officer will need to inspect the house before making a decision whether to approve the request.
How to Obtain Mortgage Insurance?
How can you obtain the mortgage insurance money? Well, borrower needs to make a claim prior to receiving the insurance money. The process is going to take a while to complete.
Based on the Midland Mortgage clause, borrower should fill in the form to state their case. The form can be found in Midland’s website. After the lender helps submitting that form to the insurance company, an inspector will be appointed to delve into the situation. It is likely that the inspector will visit your house to do their job. Once the claim is deemed suitable, the insurance money will be transferred to the lender and borrower.
Some people just do not want to deal with the legal side of mortgage such as Midland Mortgage clause. However, this knowledge is critical. If homeowner does not own this knowledge, they might be subjected to unfair treatments. It can also have legal implications. Hopefully this information is received well.