Monday, April 20, 2009

Job-loss mortgage insurance for some, not all

Typically ineligible for job-loss mortgage insurance are those always on the bottom of the bailout/relief totem pole -- hard working self-employed people, independent contractors, work-at-home business owners and the like. Washington has been literally mum on helping the self-employed in this area and others.

by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - A growing number of job loss mortgage protection insurance policies help take the fear out of home buying, but the coverage -- sometimes over-hyped as a form of recessionary relief -- is not for everyone.

The not-for-everyone consideration isn't necessarily because of cost, the type of home you buy or the feasibility of such insurance, though they are issues to consider.

Unfortunately, for some homebuyers, the coverage simply isn't an option.

When it is available, there are a host of considerations consumers must ponder before buying.

Simply put, for policy holders, job-loss mortgage insurance pays your mortgage when you lose your job -- to a point. Typically paid direct to the lender, policy benefits can cover principal, interest, taxes and insurance, if all items are included in the original mortgage payment.

The coverage can be a good deal if you fear job loss, if you have no other financial back up should your employment end or if you know you later can't refinance or modify your loan out of trouble and don't want to lose your home.

Today's job-loss mortgage insurance has become a growth industry spawned by the recession -- incentivise home buying by adding protection against a shrinking economy to boost home sales. Because housing is a cornerstone of the economy, more sales, hopefully, will help stimulate the economy.

Once only the product of traditional insurers, job-loss mortgage protection now comes from a variety of sources.

• Traditional insurers -- See: and Mortgage Guardian.

• Home builders for new homes -- Offering policies are: Toll Brothers; Lennar; Ryland and others.

• Banks, credit unions, lenders -- The Bank of America has long offered a policy that covers not only job loss, but also hospitalization, disability and death.

• Real estate agents -- For example, Keller Williams offers coverage through the Rainy Day Foundation.

• Realty associations -- At least one, the California Association of Realtors (CAR) offers coverage.

• State and local housing agencies -- For example,

Shop around, a lot

With a host of variety in coverage, costs, provisions and requirements. Here are some issues to consider.

Variations. Premiums, terms, limits, benefits all vary. So shop around. Evaluate your debt and income to determine the policy that's best. Evaluate your mortgage payment to determine if a given policy will provide sufficient benefits.

Affiliation. Some policies require an affiliation with a lender, realty agency or other entity. Keller Williams, for example, offers its policy through the Rainy Day Foundation, which requires participation in its home ownership counseling program. New home builders sometimes require that you use their affiliate lender. CAR requires that consumers buy homes from a licensed 'Realtor'.

Waiting periods. Depending upon the insurer, potential policy holders must be employed full time or for at least 30 hours a week and for a period of time before they can obtain coverage. Once you buy coverage, there is a moratorium of a month or more before the policy kicks in. After the moratorium, the home owner typically must be out of work some time, say 30 days, before the first benefit is paid.

Limits, Terms. Benefits aren't paid forever and they may not cover the full cost of your mortgage payment. Some policies pay for six months, some pay nine, others for 12 months. CAR limits payment to $1,500 a month, for six months, for example. And once funding is depleted the CAR policies will remain in force, but new policies won't be available.

Some policies require purchase as part of the acquisition process, other policies allow you to buy the insurance whenever, with waiting period provisions, of course.

Other policies require that you finance the cost along with the mortgage, still other policies allow you to buy coverage as a separate cost and payment.

And now, here's the rub

Unfortunately, not everyone can buy the coverage.

Typically ineligible are those always on the bottom of the bailout/relief totem pole whenever it comes to special assistance -- hard working self-employed people, independent contractors, work-at-home business owners and the like. Washington has been literally mum on helping the self-employed.

Others ineligible for some or all policies include:

• The already unemployed.
• Individuals under 18 and over 60.
• Retirees at any age.
• People who work in sectors with a high rate of economic distress or existing unemployment.
• Military personnel, especially retirees.

© 2008 DeadlineNews.Com

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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!

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