Insurers of mortgages coming forward to contain foreclosures

July 29th, 2009 | Tags: Foreclosure

foreclosure-prevention

The economic recovery is nowhere in the horizon thanks to increasing unemployment and rush of residential foreclosures. The insurers of mortgages are however coming forward to contain the menace. It has been pioneering in the development of systems and methods to support the federal measures like HARP and HAMP. The insurers have joined hands with lenders and the servicers to produce results. The programmes are in their nascent stages but already the signs are hopeful.

The insurers are working in partnership with Fannie Mae and Freddie Mac together with servicers to implement modification or refinancing of loans under these two programmes – HARP and HAMP. The insuring group has developed underwriting back-up facilities and standardization of reporting methods to allow borrowers take a “second look” into their mortgages if they have been initially refused modification on a non Fannie and Freddie loan.
Kevin Schneider of Mortgage Insurance Companies of America (MICA) said, “It is more vital than ever for the housing finance industry to do its part to create stability in the marketplace. MICA’s members are working closely with borrowers, lenders, investors, credit counselors and government agencies to modify or refinance existing loans to make them more affordable,” he noted. “In 2008 alone, mortgage insurers, working with servicers, were able to save almost 100,000 people from losing their homes. The total sum of those mortgage workouts was nearly $18 billion.”

Suzanne Hutchinson also of MICA said, “Mortgage insurers are pulling out all the stops to help stem the tide of foreclosures.”

It is to the interest of all in the mortgage industry to prevent foreclosures because everyone suffers from it. Borrowers lose their homes, the insurers have to pay for claims and the investors suffer monetary losses. Foreclosures are undertaken only when all other alternatives are closed. The mortgage insurers are prepared to honour all the loans that are valid.

The members of MICA have also accepted the new rules set out by Fannie Mae and Freddie Mac that permits 125% loan-to-value proportion for refinancing of the mortgages that are eligible for assistance under HARP. This extension of the upper limit will help a sizeable chunk of troubled borrowers.

MICA is a trade group comprising of members of the private mortgage insurers. It helps the loan givers and the investors to make money available to the purchasers by arranging for reduced down payments mortgages. These institutions are protected by MICA from financial risk because of defaults.