alternate settlement option

An option sometimes used by mortgage insurers to settle a claim in full in the event of an impending foreclosure. The payout includes legal costs, foreclosure fees, and expenses associated with bank repossession. The alternate settlement option fully discharges the insurer's responsibility under a policy. However, it eliminates the option of the insurer recovering some or all of the claim payout amount even if the home is later sold for more than enough for the lender to recover such costs.