How Mortgage Insurance Can Stop Foreclosure
If the bank forced you to buy mortgage insurance to qualify for your home loan, you probably thought it was just another wasted closing cost. WRONG! This one’s your new best friend so get to know them ASAP.
Mortgage insurance was originally designed to protect banks if you default on your loan by reimbursing lenders for their foreclosure related losses and expenses. However what’s happened is that mortgage insurers have literally become “borrower’s advocates” in many situations because they’d rather help you avoid foreclosure than paying bank claims an averaging $50-60,000 per loan.
Although large insurers and banks generally make decisions solely based on short term profits, this is one of the rare times when their game plan happens to coincide with your interests so take advantage while it lasts. You can find contact information for your mortgage insurer on your loan closing documents or speak with your original broker or lender for the information.
Mortgage insurers are obviously motivated to work with you because whichever Foreclosure Alternative you choose, its always cheaper and easier than the expense of Foreclosure Lawsuits, foreclosure sales, lawyers fees, etc… all of which must be paid by the insurer to the bank for each and every bad loan.
There are several ways mortgage insurance can help you avoid foreclosure such as contributing part of the money for a loan modification, paying past due balances, unpaid interest or late fees to help you get caught up and give you a second chance to stay current on payments, or simply giving you money to help with transition and relocation if you decide on a short sale. Read More on Loan Modification and Short Sales.
Regardless of which foreclosure option you choose, its important to provide enough detailed financial information to convince the insurer you need help. If the company suspects you’re looking for a free ride, they may take their chances and hope you avoid foreclosure on your own rather than helping you.
And remember that whatever the mortgage insurer may say or do, the owner of your loan must provide final approval so make sure they sign off on anything the insurer offers to provide. The best case scenario and one you should push for is having the representative from your mortgage insurer work directly with the lender to avoid delays and confusion and provide the best chance of success.