Monday, July 11, 2011
PMI to pay underwater borrowers to stay
Private mortgage insurer PMI Group (PMI: 1.415 -6.29%) will offer cash incentives to some homeowners in negative equity to help prevent mortgage defaults.
PMI subsidiary, Homeowner Reward is working with Loan Value Group, to administer the pilot program, called Responsible Homeowner Reward.
The program launched Monday and will start in select real estate markets where falling house prices left borrowers owing significantly more on their mortgage than what the property is worth.
Participation in RH Reward is voluntary and there is no cost to the homeowner, according to PMI. The cash will come after a lengthy period of keeping the mortgage current, generally from 36 to 60 months. According to PMI, the reward will be between 10 to 30% of the unpaid principal balance.
The Loan Value Group works "to positively influence consumer behavior on behalf of residential mortgage owners and servicers," according to its website.
LVG programs already delivered more than $100 million in cash incentives to distressed homeowners. However, those programs focus on turnkey solutions such as cash for keys, with an aim to avoid principal forgiveness. The Homeowner Reward program is taking a different path.
"We continue to seek creative and effective loss mitigation strategies," said Chris Hovey, PMI vice president of servicing operations and loss management. "PMI is especially supportive of homeownership retention efforts in states that are facing unprecedented housing challenges."