May 28, 2009 3:03 pm US/Pacific
Job-Loss Coverage Gives Homebuyers Security
ANTIOCH (CBS 5) ―
Even with foreclosures on the rise, record-low mortgage rates gave new-home sales a slight push in April. And there's a little known tool that homebuyers worried about growing unemployment can use to get a boost in case they lose their jobs.
Jessica Lopez and her family were thrilled to move into their first home. But four months after they purchased it, her husband lost his job.
"That was going to make it so we couldn't afford our payment for our mortgage, for our car, for anything," Lopez said. "It was very scary, we didn't know what to do, we didn't have much savings, we had spent every last penny on the down payment."
But lucky for them, their lender had enrolled them in a loan protection plan that paid their mortgage while Lopez's husband found a new job.
"It took a lot of stress off. I did not want to become of the many people living on the streets," Lopez said.
The plan is called the Homeowner Education and Loan Protection, or HELP, and this is how it works: Homebuyers must enroll in the plan through a participating lender. The insurance provides up to six months of mortgage payments in the event of a job loss within the first two years. The plan pays a maximum benefit of $2,500 per month toward principal, interest, taxes and insurance with no payback necessary.
The Rainy Day Foundation is a non-profit organization that started the program last year. Its CEO Rick del Sontro said, "It doesn't cost the consumer anything. See, that's the beauty of it."
Del Sontro said the insurance costs lenders an average of $600 per plan.
"And that's nice because especially in this environment today where people are very concerned about their job going away, their division being shut down, their company going out of business, this can act as a peace of mind, if you will, during the home-buying process, " del Sontro said.
The Rainy Day Foundation also has an emergency pool of funds set aside for people enrolled in the program. The funds can be used at no charge in the event homeowners run into short-term financial problems unrelated to job loss.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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