Thursday, May 14, 2009
by Broderick Perkins
© 2008 DeadlineNews.Com
Unauthorized use of this story is a copyright violation -- a federal crime
Deadline Newsroom - A growing number of job loss mortgage protection insurance policies help take the fear out of home buying, but the coverage is not for everyone.
The not-for-everyone catch isn't necessarily because of cost, home type, or financial feasibility of such insurance -- though they are issues to consider.
For some homebuyers, the coverage simply isn't an option.
Simply put, job loss mortgage insurance pays your mortgage when you lose your job -- to a point. Paid direct to the lender, policy benefits can cover principal, interest, taxes and insurance -- or all items are included in the 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.
"The job loss insurance is a big help for many mentally, knowing that the help is available if they should lose their jobs. And it gives comfort for some that are sitting on the fence," said Quincy A. Virgilio, Jr. president of the Santa Clara County Association of Realtors.
Today's job loss mortgage insurance has become a growth industry spawned by the recession. The idea is to incentivise home buying by adding protection against a shrinking economy. Theoretically, that will boost home sales.
Once only the product of traditional insurers, job loss mortgage protection now comes from a variety of sources.
The California Association of Realtors (CAR) became the nation's first realty association to offer a mortgage protection program. It's for first-time home buyers who lose their jobs.
"This program is a big success and all buyers who use a Realtor are eligible. All qualified first time buyers should definitely enroll in this program because the restrictions are few," said Julia Truesdale Keady, president of the Silicon Valley Association of Realtors.
Well, not quite. The program does have its limitations.
The $1 million program is only funded to assist some 3,000 homeowners, but CAR's Housing Affordability Fund Mortgage Protection Program (MPP) beats a blank for those who are lucky enough to land a policy.
MPP offers first-time home buyers who lose their jobs up to $1,500 per month, for six months, to help make their mortgage payments.
A qualified co-buyer also can participate in the program, and receive a monthly benefit of $750 per month for up to six months. Program benefits also include coverage for accidental disability and a $10,000 death benefit.
"The Mortgage Protection Program was developed to help ease the anxiety of consumers who are concerned about potential job loss and its impact on their ability to pay their mortgage should they purchase a home," said CAR President James Liptak.
To qualify applicants must:
• Be a first-time home buyer -- someone who has not owned a home in three or more years.
• Open escrow April 2, 2009, or later, and close on or before Dec. 31, 2009.
• Use a licensed California "Realtor" in the transaction.
• Purchase the property in California.
• Be a W-2 employee.
Request an application for the program from CAR.
Others offering job loss mortgage insurance include:
• Insurers -- See: InsuranceAgents.com and Mortgage Guardian.
• Home builders -- Offering policies are: Toll Brothers; Lennar; Ryland and others.
• Lenders -- The Bank of America has long offered a policy that covers not only job loss, but also hospitalization, disability and death.
• Realty agents -- For example, Keller Williams offers coverage through the Rainy Day Foundation.
• Government housing agencies -- The California Housing Finance Agency offers HomeOpeners.
Consumer advocate Mark Eisenson isn't sold on the coverage. He says buying job loss mortgage insurance may be a sign you haven't taken care when buying a home in the first place.
"Losing a job is more than a nuisance. It can be a catastrophe. Unfortunately, job loss insurance is something you only want if you are overextending yourself by buying a house you can't really afford, at a time when you have real concerns about losing your job," said Eisenson, co-author of the new e-book Reduce Debt, Reduce Stress: Real Life Solutions for Solving Your Credit Crisis.
"I'd rather stay where I am, cut expenses, reduce debts and stress, build an emergency fund, and create a back-up source of income -- before I'd start looking for a new house," he added.
If you believe the coverage is right for you, be prepared to sift through a variety of coverages, costs, provisions and requirements.
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© 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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