When mortgage loan fees help
Mortgage loan insurance wasn’t introduced to protect the buyer, but the lender. But over the years the providers of this insurance have developed methods for helping struggling homeowners.
First, let me be crystal clear: mortgage loan insurance—the premium you pay for a high loan to value mortgage—is not intended to help you, the home buyer.
The sole intent of this insurance is to protect the banks and mortgage lenders in the event that you go into default.
That said, I was rather intrigued to find out that mortgage loan insurance providers, such as Genworth and CMHC, provide ongoing solutions to homebuyers struggling to make payments. This aid is not completely altruistic. By helping a struggling homeowner, these companies avoid having to pay out insurance claims by lenders. But the added benefit is that a homeowner doesn’t lose all their equity through a foreclosure.
According to Rob Kirby, vice president of loss mitigation at Genworth Financial Canada, there were 5,000 families who took advantage of his company’s Homeowner Assistance Program in 2010.
- 40% re-negotiated the mortgage to include payments that were in arrears;
- another 25% were provided payments or partial payments by Genworth, in the form of a loan, to make towards their mortgage from their primary mortgage lender;
- 20% had their loan renegotiated or modified, allowing many to take advantage of lower interest rates, or extended amortizations;
- The final 15% included deferral of payments and other extreme solutions.
“We pride ourselves as being solution providers,” says Kirby. “We try and think outside of the box to find the right long term solution for both the borrower and the lender.”
According to Kirby, Genworth’s success rate is between 85% and 90%. This means that in 2010, between 4,250 and 4,500 families didn’t lose their home, or their equity, because of Genworth’s Homeowner Assistance Program.
If you’re struggling to make payments, and originally paid a mortgage loan insurance premium, you can get an idea of what type of assistance you may qualify for by using Genworth’s evaluator tool.