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Insurance Company Helps Homeowners Avoid Foreclosure

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By SHANNON BEHNKEN | The Tampa Tribune

Published: November 25, 2008

TAMPA - Homeowners facing foreclosure could find help in an unlikely place — the company that insures their mortgage.

Buyers who took out conventional loans and had a down payment of less than 20 percent typically were required by lenders to carry PMI insurance.

The fee is usually tacked onto mortgage payments and insures that if the homeowner defaults on the loan, the lender will get a settlement. There are just six such mortgage insurance companies in the United States.

As foreclosure rates skyrocket across the country, these companies have seen default claims — and their payouts — jump, too. One of the companies, Genworth Financial, is jumping in to help keep loans from failing and avoid having to settle with the lender.

When a lender says it can't work out a loan modification with a homeowner and needs to foreclose, Genworth doesn't just take the lender's word. The company has a homeowner assistance team that negotiates between the homeowner and lender.

The effort, company officials say, is paying off.

The company today released a report card for the program. In the past 12 months, the company has helped 11,109 of its customers in obtaining loan workouts, the report shows. All those customers avoided a foreclosure on their records, and 89 percent stayed in their homes, the company said.

Of the top 10 states where Genworth does workouts, Florida has been among the most successful. The company has mediated 901 workouts in the past year in the Sunshine State, second only to Texas. Florida has seen the largest increase in workouts among the states — 163 percent.

"Our main goal is to keep the person in the home and avoid the claim," said Chris Antonello, marketing director for Genworth. "A foreclosure is a tremendous loss for all of us."

When an insured home is foreclosed, Genworth typically pays out a settlement to the lender equal to about 20 to 30 percent of the principal amount of the loan, Antonello said.

When a borrower gets into trouble, lenders recommend that he or she call them right away to work something out to keep the homeowner in the house. But many homeowners say they have no luck dealing with their lender.

That's when Genworth steps in. While it can't offer homeowners anything more than the lender could, it makes sure every option has been fully explored, said Alan Goldberg, vice president of the homeowner assistance program.

If Genworth is also unable to work out a new loan for the borrower, Goldberg said, it tries to assist in a short sale. In those cases, the home is sold for less than the mortgage amount and the rest is written off. Genworth typically pays part of the shortfall to the lender, but it avoids the full settlement. Homeowners avoid a foreclosure on their credit.

PMI companies, however, can only put a dent in the nation's foreclosure crisis, Goldberg said, because many of the homes in foreclosure don't have PMI insurance. The companies avoided subprime loans made to risky borrowers, and those loans now make up the bulk of the nation's foreclosures.

Reporter Shannon Behnken can be reached at (813) 259-7804.

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