Magazine article American Banker

Mass. Agency's Pay Protection

Magazine article American Banker

Mass. Agency's Pay Protection

Article excerpt

The Massachusetts Housing Finance Agency says it is thinking about ways to help other quasi-public housing agencies offer mortgage insurance that protects borrowers against job loss.

The agency, known as MassHousing, began offering the insurance July 1. It has yet to be included with a closed loan, but "we're actually beginning to talk with other housing finance agencies," Thomas R. Gleason, MassHousing's executive director, said in an interview Monday.

The policy, which is part of some loans that are now in the pipeline, covers up to six months of principal and interest during a loan's first 10 years. It is included, at no extra charge, with MassHousing's regular mortgage insurance policies, which cover the mortgage's holder.

Besides meeting a huge need for first-time homebuyers, payment protection also presents an opportunity for agencies to collaborate more, Mr. Gleason said. "We think a mortgage insurance product like this has the power to unite the buying power" of various agencies.

Besides producing economies of scale, working together would bring geographic diversification and standardization -- which could bring savings on reinsurance and bond pricing, he said.

Housing agencies that offer standard mortgage insurance can add payment protection using the template MassHousing has developed, Mr. Gleason said. If an agency does not offer even regular insurance, MassHousing could help it do so, perhaps through a joint venture.

Offering payment protection is helping the companies that reinsure MassHousing's insurance fund to cut the amount of premiums it must cede to them by half, he said. …

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