Mortgage insurers try to reduce foreclosures |
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Incentives for homeowners
PMI Mortgage Insurance talks with homeowners on the assumption that "the borrowers in some cases will take the call or answer the letter that's not from the servicer," says Gene Campion, the loss-mitigation chief. On top of that, PMI has a joint letter campaign with Consumer Credit Counseling Service, or CCCS, of San Francisco, inviting borrowers to call the agency.
PMI is part of the Hope Now coalition, which holds "homeowners events" where borrowers can negotiate loan workouts face to face. PMI gives its insured, delinquent borrowers an incentive to show up at the Hope Now shindigs: debit cards. A lot of these borrowers walk out that same day with a workout plan. "Little things like that, where we pick up 50 borrowers here and 30 borrowers there," Campion says.
Radian mails brochures that direct borrowers to the company's Web site, which collects financial information that can be sent to CCCS of Delaware Valley, in Radian's home base of Philadelphia. "They'll work directly with the servicer to see if they can achieve a workout," says Camillo Melchiorre III, Radian's senior vice president of loss management.
United Guaranty, another mortgage insurer, focuses on speeding up the process when a lender needs to get the insurer's OK on a modification or short sale. United Guaranty is about to add an area to its Web site for homeowners in distress. Among other options, it will refer borrowers to United Guaranty's workout specialists.
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Claim advances
All mortgage insurers offer what they call "claim advances" to qualified borrowers. Claim advances are loans or grants to pay past-due amounts and bring accounts current, or even to buy lower rates. Typically, an advance is set up as a second or third mortgage at zero percent interest, to be repaid within five years.
If there's a typical recipient of a claim advance, it's someone who missed house payments because of unemployment or illness or unexpected bills, and who, in Melchiorre's words, "may have some kind of positive turnaround, but they don't have enough money to fully reinstate. The whole idea is to keep the borrower in the property if they're willing, and some kind of restructuring can be done."
Lenders aren't fond of claim advances because of the time and labor involved. As with any mortgage, they require paperwork and a closing. If the homeowner has to repay the money, it adds to the monthly debt burden that makes a future foreclosure more likely.
Radian doesn't require repayment of claim advances. "The value proposition is strong enough not to require the borrower to pay us back," Melchiorre says. Generosity has limits. The maximum grant (called a FastAdvance) is 15 percent of the loan amount or $15,000. Most recipients need far less. MGIC sometimes expects the borrower to repay a claim advance and sometimes doesn't; those decisions are made case by case.
Finally, there's an almost-invisible method that mortgage insurers deploy to combat foreclosures: They station their own employees in lenders' loss-mitigation departments. These people don't deal directly with borrowers, but they're available for unscheduled, face-to-face talks with the workout negotiators who do. The goal is to approve loan modifications and short sales more quickly.
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