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I was chatting with a friend, John Castiello, who works at Radian about the potential pitfalls associated with high Loan-To-Value lending. If you’ve followed my blog, you know my concerns.
John mentioned that Radian, as well as most mortgage insurance companies, offers programs to insure lenders against loss in the event of the non-performance of these loans. That’s good for the lenders but what about the consumer, and the effects of such defaults on the mortgage and housing industries?
John went on to tell me about a new program now offered by Radian to help both the lender and the consumer; Radian’s new MortgageAssure program. If you haven’t heard, under this program the borrower gets insurance to help them make their monthly mortgage payments in the event of non-voluntary unemployment. This is in addition to any federal or state unemployment benefits they receive.
Neither I, nor my company, are endorsing or pushing this product. However, I think this is something lenders should know. Anything that may help reduce a lender’s risk, while benefitting a borrower, seems like a good idea to me.
This type of added insurance coverage may help lenders make the difficult decision to enter the high LTV lending arena. By doing so cautiously, underwriting the loans carefully, and using the required mortgage insurance, with this added protection, they can increase business and help more people buy and retain a home. That sounds like a win for everybody.
Low down payment programs may assist first-time homebuyers in getting a home, but do they help them to afford and retain the home? In many such cases, the buyer walks away from the closing with little or no reserves for the expenses which come with homeownership. Layer on top of that an unexpected job loss and…wham, you have a default and a foreclosure. Even if the unemployment is temporary, the borrower has a very difficult time in recovery once they fall behind a few payments. Nobody wins.
This program addresses that issue. If a borrower is unemployed within 2 years of getting the loan, the insurance will pay up to $1,500 per month for up to six months. This will help the borrower maintain their monthly payments during temporary periods of unemployment or give them time to find a new job. This gives the borrower a better opportunity to stay in the home during this period and build some equity. That’s good for the consumer, the lender and helps to stabilize the housing market.
Sound like a good program? If you’re interested you can get more information at (MortgageAssure).
The game has changed; play different. Rest assured with double default protection.
