Mortgage Insurers Taking Active Role to Prevent Foreclosure
In some ways, the interests of the mortgage insurance companies are more closely tied to homeowners who are trying to prevent foreclosure than anyone else involved in the foreclosure process. Housing Wire recently reported that Genworth Financial is expanding its pre-purchase education efforts to inform borrowers about their options if they fall behind on payments and need to prevent foreclosure.
The difficulty with that effort is that most people pay little to no attention to prevention efforts. They only start paying attention when there’s a problem to cure. Ask anyone involved in health care, and they’ll agree.
It’s good to see that the mortgage insurers are taking a more active role. I’ve been saying for quite some time that their interests are betrayed on a daily basis by the servicers and investors. But investing money to educate ALL borrowers on “How to Prevent Foreclosure” seems wasteful when there’s less than a 1 in 10 chance that they’ll ever be in foreclosure.
How on earth are you going to get a borrower to pay attention to your “What to do to prevent foreclosure” presentation when they’re consumed with thoughts of location, square footage and amenities? And how, exactly, do you make the course any more memorable than a driver responsibility course at the DMV?
And if the underlying thought is, “They’ll keep the information with their loan paperwork,” I got news for you. A lot of homeowners can’t find their original loan docs, particularly those who are a high default risk.
I don’t see a large number of loans with PMI, as that went out of style with the ubiquitous “80/20″ loans that were so prevalent for the last several years. Many of the remaining homeowners just got a gigantic first lien to wash out pre-existing liens, and somehow their appraisals were high enough that PMI wasn’t required.
Gee… I wonder how that happened?
In cases where I’m working with homeowners who do have privately insured mortgages, I’ve noticed that the insurers have a keen interest in getting my feedback on “how it’s going,” and are very concerned about efforts to prevent foreclosure and keep the borrower in the home, if at all possible.
I’ve often gotten the impression that they have a sense that they’re being ripped off. At the very least, they do seem suspicious, but they don’t come right out and explicitly state it.
It’s clear to me that private mortgage insurance is the worst business model in the insurance universe. The insurer has almost no control over how a claim is handled, and can do very little to prevent claims. All the controls in place for health care providers- “We pay X for this, we don’t cover elective surgery,” and those mighty stop-loss avengers in property and auto- claims adjusters, are noticeably absent in the world of private mortgage insurance.
I sat next to a HUD official at a recent foreclosure conference at the Federal Reserve, and he was completely unaware that foreclosure attorneys were advising servicers NOT to engage in loss mitigation on FHA loans during the redemption period because the claim would be paid by HUD.
“It’s troubling to hear that,” he said.
Right now, I’m working with a homeowner to prevent foreclosure and my contact at Genworth has been a hell of a lot more proactive than the negotiator at the servicing company. She’s certainly more interested in finding a way to keep the homeowner in the home than the loss mitigation rep .
At times, you need to “tag-team” a servicer with pressure from a number of fronts in order to get a reasonable solution. If private mortgage insurers are really looking to limit their losses, they really need to invest their efforts to prevent foreclosure where it’s occurring right now.
So, if you’re a homeowner who’s trying to prevent foreclosure, what does this mean to you? Despite all of the hype you’re hearing from the mortgage companies about how they want to “help to keep homeowners in their homes,” there’s a lot of action that I see on a daily basis that doesn’t walk that talk.
If you really want to prevent foreclosure on your home, it may take more than just “sending in your information,” and hoping for the best. If you feel like you should get some help, get in touch with us:
888 327 5095.
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