Foreclosure prevention: Can mortgage insurance hurt or help me?
By Gina PogolMortgage Credit Problems Columnist
Allen Asks: Dear Gina, I just lost my job and unless I get another one fast I'm about to miss a mortgage payment. And I know that the mortgage insurance (MI) I pay each month is not for my benefit. It's to reimburse the lender if I can't pay my mortgage. Is there any help for me? Will having mortgage insurance make my lender foreclose faster because it gets the insurance payment?
Gina Says: First, you're smart to jump on this right away instead of waiting until the mortgage is sixty days behind before trying to get help. And while mortgage insurance companies do insure the lender against losses, it's not like they enjoy paying out money--regardless of whom it gets paid to.Making Contact: Insurers Step In to Help Borrowers and Lenders
Many mortgage insurers have bought in to the whole mortgage rescue concept to help borrowers avoid foreclosure and the bad credit that goes with it. First, many insurers initiate contact with borrowers, the idea being that while embarrassed homeowners might avoid contact with their mortgage servicer, they might be willing to speak with the mortgage insurer. The insurers then get the parties together or even work as a go-between with the homeowner and lender, hoping to achieve some kind of work out that leaves everyone better off.
Need More Help? Ask for a Claim Advance
Your lender is probably not drooling over your property and dying to foreclose just because there is insurance. But even if it is, your mortgage insurance (MI) provider may have a way out for you. It's called a "claim advance" and is offered by all MI companies. Qualified borrowers are offered loans or grants by the MI company to bring their mortgages current so the home can't be foreclosed on. Generally, these are set up as second or third mortgages, at zero percent interest, with a five year repayment schedule. Sometimes your interest rate can be lowered as well. MI companies all work a little differently--some companies don't make you repay the advance until you sell your home, others only require repayment on a case-by-case basis.
Your Lender Will Not Be Thrilled if Your Loan Goes South
Lenders don't like claims advances because they add a lot of paperwork and time to their workload. And if extra payments are required, it increases the borrower's debt load and the likelihood of an eventual foreclosure anyway. In addition, not everyone who asks for a claim advance qualifies for one.
Are You Eligible for Bad Luck Help from Your Insurer?
To be eligible for a claims advance, you can't be a permanently dead beat guy with a permanent history of bad credit. Typically, claim advances are granted to people who may have missed house payments because of unemployment or illness or unexpected bills, and who have a shot at a positive outcome. If you don't have the money to get caught up on your mortgage, but could keep your home and make your payments with a little help, a claim advance may be for you.
Foreclosure is on everyone's list of problems that the country desperately needs to solve. Between the Making Home Affordable program, private workouts between lenders and their borrowers, and solutions like claims advances from mortgage insurers, millions more people can expect to stay in their homes than would have been possible before.
About the Author
Gina Pogol has over a decade of mortgage lending experience, in addition to practice as a paralegal for a bankruptcy attorney, and as a business credit consultant for Experian. She is also certified to underwrite Fannie Mae loans. She earned her BS in Financial Management from the University of Nevada.
All information provided “as is” for informational purposes only, and is not financial advice. MortgageCreditProblems.com, its affiliates, and any of the independent providers of information on this site shall have no liability for any informational errors or incompleteness, or for any actions taken in reliance on information contained herein.
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