Coverage to pay the mortgage after a job loss

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Permalink Reply by Christopher Fernando Robbins on May 14, 2009 at 4:31pm

I have not had experience with this type of mortgage protection plan, at least not yet. I did however read the article you referenced to and I think the last line from the author sums it up best. "Bottom line: Even when it's "free," read the fine print."

I must admit it sounds as if it should be placed in the "To Good To Be True" category. The "fine print" was very evident in the last couple of paragraphs of the article. They had me hooked and nearly sold in the beginning but lost me at the end there with the "But there are some things you need to know about up front:."

There are hidden fees, exclusions, coverage limits, etc. Sounds borderline predatory to me. As a consumer, I would steer clear of these. As a counselor I would encourage a customer to contact their servicer first and talk to them about their options. Calling the servicer as soon as they know they are going to have a problem making their monthly mortgage payment, give them and the servicer more time to find a solution.

Here in Kentucky we have a program called "Protect My Kentucky Home." If the customer is unable to work with their servicer, they can contact the Kentucky Homeownership Protection Center or a "FREE" session with an approved counselor to do a work out. A work out might include reducing the montly payment amount, reducing the interest rate or extending the mortgage term. The Protection Center can also help customers find assistance to pay for their utilities and necessary home repairs.

Thanks for sharing this article.

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Permalink Reply by Jason Zavala on May 27, 2009 at 2:37pm

I have not (so this is unqualified) but I would tend to advise against like concepts (generally). Bundling of these types of services may offer false or unnecessary protections that can be identified through other resources in a more affordable manner. If I am worried about my ability to pay as an incentive to buy, then I may need reprogramming. Usually direct life, disability, and unemployment insurance plans should guide me to better solutions without having to take on a r/e pro or builder that may not be designing with my best interests in mind.

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Permalink Reply by Christopher Fernando Robbins on August 27, 2009 at 12:55pm

We recently completed a survey with 50-100 customers and one of the questions we asked them was whether or not they would choose to purchase a home right now if they knew that there was coverage to pay their mortgage in the event of a job loss. The result was pretty well unanimous. They all agreed that if a mortgage protection plan was put in place in the event of a job loss, that even in a down market they would make the decision to go a head an purchase a home. We have a large number of our customers who have decided to wait things out and see if the market turns. They are hesitant and do not want to risk anything, especially the thought of lossing a home.

I think I had mentioned earlier on that the auto industry has been doing something similar. Maybe a protection plan is not out of the question if the consumer feels it would benefit them. We will just have to wait and see I guess. I have not heard of any current mortgage protection plans out there. Has anyone else?

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Permalink Reply by Jason Zavala on September 8, 2009 at 11:26pm

Christopher, it is great to see the surveying, but I would also encourage that you check out a book called "Predicatably Irrational". Fun read. BAsed on this professor, how you ask the question, or what the true perceived advantage or avoided loss is in some situations is shocking. It is a lot about behavioral economics, I think - and it weaves very well into the issue of insurances. All the same, it will make you shake your head at how far out there people will put themselves if given the right reward/protection.

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