Mortgage Insurers Paying Advance Claims for Modifications

Private mortgage insurers have developed a "second look" program that will pay advance claims to facilitate modifications of insured non-GSE loans. The program is designed to rescue distressed mortgages that have flunked a net present value test and could be on the road to foreclosure. "As constructed, many NPV models disadvantage loans with mortgage insurance, making it mathematically appear that foreclosure is the best path," according to the Mortgage Insurance Cos. of America. "Under the Second Look program, loans that fail the NPV test are reviewed by the mortgage insurer to determine if it can provide an advance claim payment and permit the loan to be modified," MICA executive vice president Suzanne Hutchinson said. This MI program does not apply to mortgages owned or guaranteed by the government-sponsored enterprises. The trade group did not offer any estimates of how many homeowners the Second Look program could help. MICA recently reported that mortgage insurers, working with servicers, were able to save almost 100,000 people in 2008 from losing their homes.