Builders tempt buyers with unemployment mortgage insurance

Associated Press / April 3, 2009
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LOS ANGELES - Free granite countertops, swimming pools, and landscaping aren't going to persuade anyone who's afraid of losing a job to buy a home. But what about a promise to pay your mortgage if you get laid off?

With the unemployment rate at a 26-year high and home sales still in the dumps, a growing number of builders and some real estate agents are trying to coax buyers with a kind of mortgage unemployment insurance.

Major builders offering such plans include Pulte Homes Inc., The Ryland Group Inc., and Toll Brothers Inc. "We're literally adding at least one builder a day throughout the country," said Todd Ludlow of Rainy Day Foundation, a nonprofit organization that administers the programs for many builders.

Builders can pay anywhere from $450 to $900 per customer for the coverage. Some absorb the cost as they would any other sales promotion, while others pass it on to buyers, Ludlow said.

In January, Lennar unveiled a version of Rainy Day's program called "Piece of Mind Mortgage Payment Protection Plan." Lennar covers monthly mortgage payments between $1,800 and $2,500, depending on the market, for a maximum of six months. Buyers can take advantage of the program only if they lose their job within the first two years after purchasing the home.

Launched last month, Toll's mortgage protection program only covers buyers who finance their purchase through the company's lender. The plan covers a maximum of six monthly payments of up to $2,500 a month - including interest, taxes, and insurance - if the homeowner loses his or her job within two years after closing on their home.

One of the most generous programs in the industry comes from Cousins Properties Inc. in Atlanta. Cousins is offering to refund to buyers all their mortgage payments should the appraised value of their condos fall below the sale price after three years. Cousins will let a buyer walk away from their property if they lose their job or just can't make their payments anymore.

J. Robert Hunter, director of insurance at the Consumer Federation of America, said buyers might be better off passing on the mortgage payment insurance plans and ask for a discount.