MIC Protection: Loan Loss Reserve & Insurance

Safeguarding your MIC investment is our top priority.

In addition to selecting loans with safer characteristics (i.e., lower LTV, loan position, property marketability), and Hosper's powerful Paragon Method, there are two other ways prudent mortgage administrators defend against risk: 1) a Loan Loss Reserve (MIC only), and 2) insurance (both DMI & MIC programs).

Loan Loss Reserve
The Loan Loss Reserve (LLR) is an emergency fund, calculated as a percentage of the MICs total loan portfolio. The amount set aside is based on historical data and projections of future loan losses. The reserve is funded through profits earned by the fund, and it is held in a separate account that is not available for use by the institution for any other purpose.

The LLR is like a safety net, maintained by management as a final defence in the rare instance that risk gets past Hosper's multi-faceted defences, absorbing capital loss and leaving shareholder capital unaffected.

How do we determine the how much to keep in the LLR?

Insurance
Every loan approved by Hosper MIC must have the following insurance, to better protect the fund and its shareholders. 

1. Home insurance
Adequate home insurance must cover either, a) full replacement coverage of the total value of all mortgages on the property, or b) full replacement coverage of the value of the property.

2. Title Insurance
This protects the investor against financial losses due to defects in the property title or legal ownership of the property. 

3. Errors and Omissions Insurance
This is a layer of professional liability insurance mandated for all licensed mortgage brokerages, mortgage administrators, exempt market dealers, appraisers, and law firms in Ontario. This is an added layer for protection for the investor (or service provider) in the event of a loss resulting from professional error.

All in all, security is the #1 priority for Hosper MIC. If you have any questions about our security measures, please contact us.