After Leah's home is repossessed and sold, £35,000 is still owed. The lender's mortgage indemnity insurer pays the lender £20,000 under the policy. Who can pursue Leah, and for how much?
A mortgage indemnity (higher lending charge) policy protects the lender, not the borrower. Once the insurer pays the lender's claim, it takes over the lender's rights to the extent of its payment (subrogation), so it can pursue Leah for the £20,000 it paid (CeMAP spec v14 MRT2 AC5.1). The lender can still pursue the £15,000 it has not recovered. The insurer is not subrogated beyond what it paid, and the payment does not clear Leah's debt.
Believing the indemnity premium the borrower paid protects the borrower.
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