Flagstar, in a sign of the times, has paired up with MI company Genworth to offer a low-down payment mortgage benefit designed to cover a home buyer's mortgage payments if he or she becomes involuntarily unemployed. "Job Loss Protection" covers a borrower's mortgage payment (principal, interest, taxes and insurance) of up to $2,000 a month for up to six months during their benefit period, with a maximum of three monthly payments per job-loss occurrence in the event of involuntary unemployment. The benefits are paid directly to the mortgage company just as if the borrower had made the payment, although the vesting period is 60 days after closing, and payments begin 30 days from the date of involuntary unemployment. Coverage stays in place for up to three years after the loan closes and the mortgage insurance remains in place.
A translation, in English, for non-mortgage professionals:
Flagstar is a mortgage lender. MI is mortgage insurance. Usually it’s a little add-on fee you pay every month, included as part of your mortgage payment, and it protects your lender if you default on your mortgage and go into foreclosure.
In this case, there’s (probably another) little add-on monthly fee which protects you, the homeowner, if you’re unable to make your mortgage payment because you lost your job. There’s a lot of that going around lately, so this is pretty darn cool. No idea how much this insurance costs but it’s a great idea, given the scary economy we’re all wading through.
I’m a little unclear about the time period involved: “up to six months” with a “maximum of three months payments”. Is it 3 or 6 months you’ll pay my mortgage while I look for work? In any case, this is still a cool idea. I wouldn’t be surprised if this is soon something you can add on when you purchase a home, like you now can choose to add on a Home Warranty or not.