Some of the most powerful players in the American home mortgage market believe that they can help homebuyers keep their homes and stay out of foreclosure - even when they unexpectedly lose their jobs or get sick and can't work.
They have begun grafting onto mortgages low-cost and no-cost insurance policies that provide anywhere from six to nine months of loan payments after an involuntary job loss. In the case of one giant firm, the insurance plan will also extend to income losses caused by accidental injuries or sicknesses that render homeowners unable to perform their jobs.
MGIC Investment Corp., one of the largest mortgage insurers in the country, plans to roll out a new, $2,000-per-month maximum payment plan nationwide to its hundreds of lender partners during June, at what it insists will be zero direct or indirect cost to consumers.
Another large insurer, GE Mortgage Insurance Corp., plans to announce its own version shortly as well - with a $2,500 maximum payout for up to six months of involuntary unemployment.
Meanwhile, dozens of lenders, homebuilders and government housing agencies have begun providing a private, involuntary job-loss plan known as "mortgage guardian." That plan is run by Mortgage Payment Protection Inc. of Altamonte Springs, Fla.
The move to attach monthly-payment insurance programs onto home loans is not a case of sudden corporate charity or heartfelt compassion for the unemployed. It's a bit more complicated. When borrowers lose their jobs because of layoffs or overseas outsourcing, their mortgage defaults are financially painful for more than their families alone.
Lenders and mortgage insurers get hurt, too. When unemployment-triggered defaults extend for months and lead to foreclosure, the costs for lenders and insurers can run into the tens of thousands of dollars per home. As a result, many are now eager to provide backup payment insurance designed to keep the home-owning household afloat - and in the home - until the breadwinners find new employment.
MGIC's top corporate leadership makes no bones about its motivations in introducing its "mortgage protection plan" at no cost to borrowers, either up front or in higher monthly premium charges.
