The other mortgage insurance
Whenever I mention Private Mortgage Insurance (PMI), the insurance that covers the lender against your default, readers get confused. Where is the insurance that covers us, if we can’t pay our mortgage? There are such programs for auto loans. Does such a thing exist for mortgage loans? Yes, Virginia, it does exist.
I have been reading about Toll Brothers. They are offering mortgage payment insurance for buyers who lose their jobs or have medical emergencies. Other builders and large companies have similar programs. The insurance covers up to $2500 of your mortgage if you can’t pay it for legitimate reasons. How great is that?
Toll Brothers currently have projects in North Attleboro, Bolton, Hopkinton, and Methuen.
No, Virginia, there is no Santa Claus… Before your sign on to something that sounds too good to be true, please be cynical with me. There are conditions, as you would expect.
As Kenneth Harney put it in the San Francisco Chronicle:
From a consumer perspective, job-loss protection - insurance coverage worth up to $15,000 (six months times $2,500 maximum) of monthly mortgage debt - sounds like a no-brainer. But there are some things you need to know about up front: -- Though there's no direct cost to the buyer, that doesn't mean it hasn't been tacked on subtly somewhere in the deal - possibly in the price of the home. -- There are key exclusions and coverage limits. For instance, the Rainy Day program doesn't kick in for two months after closing. Self-employed persons, independent contractors and active military members are not eligible. There's a 30-day waiting period after you lose your job before the first insurance payment is made. -- The Toll Bros. plan is available only to buyers who use the company's affiliated lender, TBI Mortgage Co. Borrowers who know of a coming layoff or "any impending job loss" are ineligible. The program excludes loss of income through voluntary resignations, "willful misconduct" and seasonal shutdowns. Bottom line: Even when it's "free," read the fine print.(Thank you, Kenneth.)
On the list of cautions, I would add that many readers of this blog have a healthy uneasiness about working with a lender who is affiliated with the seller. I second your uneasiness and raise you a caution.
There are other job-loss mortgage insurance programs, including the Rainy Day Foundation. This group provides counseling along with their program. But the pay-off levels are lower and probably won’t keep Massachusetts borrowers from drowning.
Has anyone found a mortgage insurance that will cover a borrower who is in a temporary slump? I haven’t seen one yet.
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Masshousing's PMI insurance includes protection if you lose your job. I'm not sure what company it's through, but it was one of the only reasons I'm not too upset about that extra 150 tacked on to our morgage every month.
Bank of America offers Buyers Protection Plan that borrowers might want to utilize. It offers payment relief in the event you lose your job through no fault of your own or are unable to work due to injury or illness.
BoA included 1 year of coverage with my mortgage, after which I would need to pick up the premiums if I chose to continue. However, I also got dozens of offers in the mail for this type of insurance after we closed.
MassHousing is the actual mortgage insurer - using funds from a state municipal bond fund.
Genworth Mortgage Insurance provides job loss protection at no cost to borrowers on low down payment loans it insures through participating lenders. The insurance covers the homeowner's mortgage payment, including principal, interest, taxes and insurance, for up to $2,000 a month for up to six months. Genworth pays for the insurance because it helps keep finacially troubled borrowers in their homes and avoid default. The borrower's unemployment must be involuntary. If you qualify for state unemployment benefits, you qualify for payments under the Genworth program. There are no extra lender charges, on loans with the insurance. It's truly no cost.
Genworth Mortgage Insurance provides job loss protection at no extra cost to borrowers who take out low down payment mortgages through participating lender partners. The insurance covers the mortgage payment (principal, interest, taxes and insurance) for up to $2,000 a month for up to six months for homeowners who lose their jobs involuntarily. If the borrower is eligible for state unemployment insurance, they qualify. Lenders receive no compensation, and the mortgage payments are identical to loans not covered by the insurance. Genworth provides the service because it helps financially troubled borrowers stay in their homes and avoid foreclosure.
Genworth - PMI Unemployment Insurance. Beware and don't expect actual payment(s) on your behalf. Being unemployed and providing proof of unemployment payments is not enough. You must wait at least 60 days before a payment is made on your behalf - if you are deemed qualified. Genworth hires a company to make these decisions. That company denies anyone who was not on the job working at least 30 hours each week, weeks 1-12 prior to a layoff. This means you can not have taken any type of leave from your job - i.e., if you were a full time employee, worked 10 hours one week and took the remainder in vacation leave - you will be denied coverage.
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