CastleLine, a provider of risk management and insurance solutions, is offering a certified loan program to Plaza Home Mortgage, Inc., intended to help protect the company from underwriting errors, fraud and other loan manufacturing defects.
CastleLine has been sharing the program with its correspondent lenders, such as Peoples Mortgage, to grow its business, according to a company press release.
“Protecting and increasing company value is a primary goal for a lender,” CastleLine Executive Vice President Justin Vedder said in the release. “With the Plaza program which helps to mitigate representation and warranty risk, lenders should be able to reduce loss exposure and in turn increase their organizational value. Peoples is a company that has captured this value and is able to quantify it.”
“In today’s competitive market, it is challenging to differentiate yourself from your peers,” Plaza Executive Vice President and Chief Financial Officer Mike Fontaine said. “Through the CastleLine Certified Loan Program, we are able to basically eliminate representation and warranty risk for our customers, a real benefit. Peoples is a great example of a lender that has captured this benefit.”
Peoples Mortgage has offered home buyers real estate financing and personalized customer service since 1998, the release states. Over the last nine years, Peoples has grown from 30 to 520 employees and is active in 33 states. While quality control is extremely important to Peoples, even with strict processes in place, underwriting errors and regulatory missteps do occur. Any hard-to-detect underwriting error could result in a substantial loss to Peoples if Plaza was not insured under the CastleLine Certified Loan Program. The Certified Loan Program helps protect customers from losses arising from loan manufacturing defects, underwriting errors and misrepresentations, and borrower, seller and employee fraud.
“Based on our own calculations, we gain a value of more than 10 basis points (bps) per loan/per transaction with the Plaza relationship,” Peoples Mortgage Managing Partner Shawn Morris said. “When you factor in the cost of potential defects along with the savings on the deductible, the calculation was simple.”
The release states that through Plaza’s relationship with CastleLine, Peoples recently was able to:
- Save $65,000 on one loan, instead of incurring a $70,000 loss, because the company only had to pay a small insurance deductible of $5,000 plus premium over par. Additionally, as a member of the Lenders One cooperative — a national alliance of independent mortgage bankers, correspondent lenders and suppliers of mortgage products and services — Peoples also benefited from a lowered deductible.
- Expand its business volume and realize potential savings through its new strategic approach.
- Realize the value of Plaza’s offering and determine that investors could no longer be weighed solely on price, efficiency and ease when selling on the secondary market.