Focusing on people's fears about losing their jobs, Maryland mortgage lenders are starting to offer a novel form of insurance that will make monthly house payments if the homeowner gets stripped of a job.
"Unemployment is a big issue when you're buying a home," said Robert M. Connelly, president of Atlantic Home Mortgage Corp. of Towson, which began offering the insurance about a week ago. "Homebuyers are very reluctant to sign on the bottom line not knowing whether they're going to have their job the next day. This helps them make up their mind to buy a home."
The nation's unemployment rate rose to 7.3 percent in February, the highest level in 6 1/2 years, and realty experts contend that job worries are a major factor restraining many Americans from buying a home.
But the insurance program, pioneered seven years ago by Morgard Inc., of Rosemont, Pa., ago calms the fears of would-be buyers, said Julianna O'Leary, Morgard's director of marketing.
Under Morgard's program, coverage starts 31 days after "involuntary unemployment" begins and continues for one year, assuming the insured remains unemployed that long. Morgard generally defines an involuntary unemployment as occurring when the insured qualifies for unemployment compensation.
The coverage provides money for the house payment -- principal, interest, insurance and taxes.
With the unemployment rate rising, Morgard, which sells its insurance product solely through mortgage lenders or homebuilders, is cautious in accepting policyholders, Ms. O'Leary said.
"You have to be careful you don't put yourself out of business," she said.
Mr. Connelly of Atlantic Home Mortgage pointed out that several occupations are excluded from coverage under the Morgard program. Homeowners in the military and those who are seasonal workers, farm workers and professional athletes cannot be covered, he said, nor can elected public officials "who could be out after one primary."
The average annual cost runs between 3 percent and 3 1/2 percent of the monthly house payment, or from $360 to $420 for a monthly payment of $1,000.
Local lenders expect the product to be popular.
"I think with unemployment where it is now, it will be pretty well received," said Buddy Koolhof, Owings Mills branch manager for NVR Mortgage, which recently began offering the Morgard program.