Creative Ways to Bring “Certainty” Back to Consumers

Even though the Dallas area is weathering the proverbial housing storm better than most of the nation, total transactions compared to a year ago, are way down. Prospective buyers are concerned about the economy, as well as job stability and longevity. Very few sectors of our economy are immune to the trickle down effects of the market slowdown.

Even though the Dallas area is weathering the proverbial housing storm better than most of the nation, total transactions compared to a year ago, are way down. Prospective buyers are concerned about the economy, as well as job stability and longevity. Very few sectors of our economy are immune to the trickle down effects of the market slowdown. Interest rates declined this week as a result of the weakening job market and of reduced concerns about inflation. And now, according to an article written in today’s edition of the Dallas Morning News, lenders are in the business of marketing “peace of mind” along with their notes. A home purchase is most often, the single largest investment a person will make in his or her lifetime. It is an emotional buy and can be very stressful. So what can provide the buyer with adequate peace of mind during the worst economic crisis since the Great Depression, to motivate him or her to purchase a home?

Richardson, Texas based, Service First Mortgage is the first lender in the Dallas-Fort Worth offering a program, for a one-time fee, that promises to pay up to six months worth of mortgage payments in the event the borrower is laid off during the first twenty four months of the mortgage. The fee for the security blanket, if you will, is based upon the size of the loan and the amount of coverage.  About a dozen insurance companies offer stand-alone job loss protection in Texas.  However, some companies do not market the coverage as insurance.  Service First Mortgage calls its coverage a mortgage protection plan.  Other programs are membership based.

The question for home buyers becomes, “is this single event insurance or protection” the way to go, to provide the peace of mind necessary in today’s uncertain climate? Generally speaking, specialty insurance is not a good buy. One might analyze the extra funds needed in the bank to be considered “self-insured” in the event he or she gets laid off after closing on a home. Is it worth purchasing a policy or protection plan, or does it make sense to include six months’ reserve payments in one’s own qualification calculation?

Somewhere in the sub-prime debacle, individual borrowers forgot about the personal responsibility associated with taking on debt. We can all look in a mirror, regardless of what a lender is telling us we qualify for, and we know our own spending habits. They may or may not be congruent with what a typical borrower, on our income, can afford each month.  And ultimately, the debt is our debt.