Genworth Insures Unemployed Flagstar Borrowers Against Mortgage Default
Mortgage originator and savings bank, Flagstar (FBC) implemented a new job-loss insurance plan last week in order to cover mortgage payments in the event of involuntary unemployment on the part of the borrower. Flagstar, with $14bn in total assets as of year-end 2009, said the program is available at no charge with insurance being provided by Genworth Financial (GNW). The plan is applicable in deals where the borrower provides less than 20% of the home value in their down payment. The program covers a borrower's mortgage payment -- including principal, interest, taxes and insurance -- of up to $2,000 per month for up to six months, with a maximum of three monthly payments per job loss. Benefits are paid directly to the servicer in lieu of the borrower's payment, according to a Flagstar press release. Terry Souers, a representative for Genworth, said the job loss protection program has been active for more than 7 years and has already been implemented at mortgage lenders across the country. "In today's market, it may be surprising that some people still come up with a 20% down payment, but it happens. Primarily, these are people moving up and buying their second homes who were able to build up equity in their first homes," he said. "But low down payment mortgages definitely appeal to first-time home buyers and low- to moderate-income borrowers." Flagstar said the borrower vesting period in the program is 60 days after closing, and benefit payments begin 30 days from the date of involuntary unemployment. Coverage is active for up to three years after the loan closes and the mortgage insurance remains in place. The job loss protection program is especially relevant as more and more mortgage borrowers face unemployment in the midst of continued economic fallout. Although the US government added around 50,000 temporary workers to the labor force in March to help complete the 2010 Census, unemployment remains high at 9.7%, while the U-6 measure of un- and under-employment is up to 16.9%. Write to Diana Golobay. Disclosure: The author holds no relevant investment positions.