Response to Abbey/National - Subrogation Query

Mortgage indemnity is insurance which a lender may take out for its protection where a high percentage loan is made. This insurance policy covers the situation where, at some future stage, the lender has to repossess the property and sell it and the lender suffers a loss. For example, if the property is sold for less than the amount of the borrower's outstanding mortgage (including accrued interest) the lender can claim on the mortgage indemnity to recover some of its loss. The basic security for the mortgage is the property. The mortgage indemnity, therefore, acts as a form of additional security for the lender. It provides no protection to the borrower, yes we know we are still told differently, who gains no benefit, other than a high percentage loan advance than would otherwise have been granted.

In most cases, the mortgage indemnity will cover the lender only for part of its loss and, in addition, once an insurer has paid a mortgage indemnity claim, it gains the right of subrogation; this means that the insurer can reclaim from the borrower any money it has paid to the lender under the mortgage indemnity claim. Either the lender or its insurer may take legal action against the borrower to recover the shortfall if the borrower does not repay it voluntarily, although any action is taken in the name of the lender. In most cases, the lender contacts the borrower to recover the shortfall on behalf of itself and its insurer. This does not mean that the lender recovers the loss twice; any money paid by the insurer which is collected from the borrower SHOULD then passed back to the insurer. In answer to your query I would suggest that actually the Abbey National are chasing you on behalf of the insurers, and the N probably means the insurers are not chasing you directly! Allye

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