A California marketing company has come up with a new product to help lenders make mortgages more attractive in today's difficult market.
The company, Credit Concepts Inc. of Burbank, is offering lenders insurance that will provide up to six monthly mortgage payments when a borrower becomes unemployed.
The company believes it will be a popular feature because lenders are eager to find ways to spark lagging volume.
Credit Concepts has arranged for Lloyd's of London to underwrite the insurance. It will be available in every state but Illinois. William M. Wiese, president, said it would cost about $155 a year for mortgage payments of $800 a month.
He said the program would be made available nationally through insurance agents and brokers. "We just got finished making the arrangements, and we have just presented it to a meeting of insurance agents at Lake Tahoe," he said.
Mr. Wiese said the company expects to sign up its first customers for the product this week and is looking forward to endorsement by a community banking group that already uses another of its products.
"We're billing it as a marketing tool and we think it will get a good reception," he added. "We expect that the product will be offered to the public through mortgage brokers and real estate offices."
Lenders that hold loans for investment have more flexibility in forgiving payments than those that have sold their loans in the secondary market. Some lenders in the latter group have offered protection against job loss but have usually just added the missed payments onto the end of the mortgage.
While servicers of investor-owned loans can offer some forbearance in hardship cases, their options are limited under agency rules.
The company's announcement said the insurance would be payable if the borrower is unemployed for more than 30 days and remains unemployed on the day a payment is due. The maximum monthly payment is $2,500, and the plan can be offered for one or two years.
