Job Loss Mortgage Insurance Options Growing

by Broderick Perkins DeadlineNews.Com The rise in job losses has been accompanied by an increase in the number of home owners who can't hold onto what's likely their most valuable asset. Fortunately, there is also a growing number of options to break the job loss-home loss cycle -- little-known insurance called job loss mortgage insurance that can see a home owner through tough times. The largest company, Orlando, FL-based Mortgage Payment Protection, Inc.'s (MPPI) business, largely offered through lenders, has grown 100 percent in the last five years, as payouts for claims have nearly doubled according to the company. Recently, Raleigh, NC-based GE Mortgage Insurance has offered policies direct and through a dozen companies in most states and Charlotte, NC-based Bank of America has special protection for its borrowers only. In general, job loss mortgage insurance pays the mortgage payment -- including the principle, interest, taxes and insurance (PITI) -- for a predetermined period that just may be long enough to keep home ownership intact. In many cases it's free, but there are some exclusions. • Self-employed workers, independent contractors and retired or active military personnel typically aren't eligible for the coverage. • There's a moratorium of a month or more after the policy begins before a home owner can actually file a claim. After the moratorium, the home owner typically must be out of work 30 days before the first benefit is paid. • Benefits are paid to the mortgage company or its servicer, not to the home owner. • Insurers can choose not to write policies for employees of certain industries or in regions hit hard by layoffs. • Premiums may adjust to reflect changes in mortgage payments, say, caused by adjustments to ARMs (adjustable rate mortgages). Here's a quick look at some of the details from two insurers. • Mortgage Guardian -- Offered by MPPI as a wholesale product purchased by lenders and others for pennies on the dollar, and then initially given to borrowers at no charge, Mortgage Guardian is also often available to consumers after the initial one-year, lender-paid policy expires (FHA loans offer initial coverage for two years). For the consumer, a typical policy that covers a purchase, refinance or equity mortgage has a monthly premium that amounts to 6 percent of the monthly mortgage payment. The policy pays a benefit of up to $2,500 a month, for a maximum of six months. Under the lender's initial policy, there is a 60-day moratorium. At the end of the lender's initial policy, if the consumer continues coverage, there is no additional moratorium. • Borrowers Protection Plan -- Bank of America says its plan is not insurance because it's backed by the bank and does not come with underwriting associated with insurance policies. At about 7 percent of the loan payment, BofA's coverage has no maximum on the monthly benefit amount for mortgages, refinanced loans, fixed term equity loans, even "closed end" non-mortgage consumer loans after a 60-day waiting period. The program pays benefits for up to 12 months. Coverage can include an accidental death and disability benefits. Copyright © 2004 DeadlineNews.Com -- Broderick Perkins, is executive editor of San Jose, CA-based DeadlineNews.Com, an editorial content and consulting firm. Perkins has been a consumer and real estate journalist for more than 25 years.