Code of Massachusetts Regulations
761 CMR - MASSACHUSETTS HOME MORTGAGE FINANCE AGENCY
Title 761 CMR 20.00 - Eligibility Guide
Section 20.03 - Fidelity Coverage (or Direct Surety Bonds); and Mortgagee and Fiduciary Policies
Current through Register 1531, September 27, 2024
Each Seller or Servicer must maintain in effect at all times and at their expense a Fidelity Bond (or Direct Surety Bond) and a Mortgagee and Fiduciary Policy with coverages for (a) Mortgagee Errors and Omissions and (b) Mortgage Impairment (including errors and omissions), issued by a company which falls into a financial category, as designated in Best's Key Rating Guides, of Class VI or better and is specifically licensed or authorized by law to transact business in the Commonwealth, and on a policy form acceptable to MHMFA covering all officers, employees and other persons duly authorized by Seller or Servicer to act on behalf of Seller or Servicer. Fidelity coverage (or Direct Surety Bonds) and the Errors and O missions coverage may be in the form of individual bonds or a blanket bond, covering all such persons and insuring Servicer, Seller and MHMFA as applicable, against loss arising from dishonest, criminal, fraudulent or negligent acts and errors and omissions of such persons. Mortgage Impairment coverage must insure Seller, Servicer and MHMFA as applicable against loss arising out of loss or damage to real property which results from a lack of insufficient of insurance covering loss or damage by fire or other peril.
No provision of 761 CMR 20.03 requiring Seller or Servicer to maintain bond or insurance coverage shall operate to diminish, restrict or otherwise limit Seller or Servicer's responsibilities and obligations as set forth in the Loan Servicing Agreement and Loan Participation Agreement. Deviations from the requirements of 761 CMR 20.03 will be considered by MHMFA upon request.
(1) Amount of Coverage Required.
| 0.4 % | first | $ 50 ,0 00 ,0 00 .0 0 of principal originated or serviced |
| 0.2 % | next | 50,000, 0 0 0 . 0 0 of principal originated or serviced |
| 0.15 % | next | 400,000,000.00 of principal originated or serviced |
| 0.125 % | next | 500,000,000.00 of principal originated or serviced |
| 0.1 % | over | 1,000,000,000.00 of principal originated or serviced |
Sellers or Servicers required to maintain fidelity coverage by an agency of the federal or state government shall maintain the higher amount of coverage where there is a discrepancy between the amount required under 761 CMR 20.03 and that required by the federal or state government agency. A deductible clause in the amount of $1,000 or 0.1% of the face amount of Fidelity Coverage, whichever is higher, is permissible.
(2) Reports. Upon request, the amount, kind and underwriter of Servicer's Fidelity or Direct Surety Bond and Mortgagee & Fiduciary Policy shall be reported by Selleror Servicer to MHMFA and adjustments in the amount of coverage may be required at that time.
(3) Cancellation of Coverage or Refusal to Renew. Seller or Servicer shall promptly notify MHMFA if a Fidelity or Direct Surety Bond or Errors and Omissions Policy is cancelled for any reason. Seller or Servicer shall promptly notify MHMFA of any insurer's refusal to renew a Fidelity or Direct Surety Bond or Mortgagee and Fiduciary Policy at the expiration of a premium period. Seller or Servicer shall also notify MHMFA of any additional restrictive terms required by any insurer as a condition of renewal.
(4) Embezzlement, Fraud and Claims Against Underwriter or Surety. Seller or Servicer shall promptly report to MHMFA all cases of embezzlement, fraud, criminal or dishonest acts related to its loan origination or servicing activities by any employee, officer or agent of Seller or Servicer and claims made against any underwriter or surety.
