Possible New Source for Mortgage Assistance

Struggling homeowners may be able to get help from a new, rather surprising source–their private mortgage insurance company.

Mortgage insurance is not the same as homeowners insurance. It is a type of protection for lenders in the case of loan defaults, and is required to be purchased by borrowers who have a down payment of less than 20%.

With the state of the economy and the millions of loans either in or facing default, this move on behalf of the private mortgage insurers is a smart one…not only for the obvious reason that it will likely create more business for them on new home purchases, but preventing foreclosure is helpful to them as well and saves them money.

Private mortgage insurers end up paying a lot of money if a home it insures goes into foreclosure. Their role in such a scenario is to try to compensate the lender for the default. With all the homes in foreclosure or on the way to that point, this is very costly.

Some companies are developing new ways to help struggling homeowners, such as offering no interest loans to help borrowers get caught  up with defaulted payments, and offering job loss protection features for a specified time (for example, if you lose your job you could be eligible to receive funds each month, for a specified time after the loss, toward your mortgage payment). Some may even offer to help streamline loan modifications that qualify under government programs, but where the servicer is too busy to help get the process going.

Don’t get too excited yet. Each mortgage insurer will have a set of eligibility requirements that you will have to meet (for example, you will likely have to show that you are able to make payments, and may be required to prove that your financial setbacks are what led to your inability to make payments on your loans).

To find out if your insurer can offer assistance, look on your mortgage paperwork to get the name of the insurer and give them a call.

Since this help option is so new, and since many of the other assistance programs available are overloaded, there may be changes implemented in the future that may make the assistance provided harder to obtain.

The good news is that you may have another option in your arsenal to prevent foreclosure, so start learning more and see if this one can work for you.