Mortgage Protection for the Unemployed

One developer is addressing the unemployment concerns of tentative condo buyers with mortgage payment protection coverage.

David Beckham insures his legs, and Tom Jones insures his chest hair. But many non-celebrities have a hard time insuring their brick-and-mortar possessions, like homes and cars.  It's almost unimaginable that you could secure insurance to cover your mortgage payments if you get laid off-unless you're buying a Thornton Place condo in Seattle, for example.

Sign of the times

The specter of job loss during this recessionary economy is scaring consumers into putting off their large purchases. Auto sales are beyond sluggish, and the housing market recovery still seems like a pipe dream.  Relatively few consumers feel confident enough in their financial situation to commit to years and years of loan payments.

The auto industry has addressed these concerns by rolling out unprecedented payment protection plans. These provocative programs promise to make auto loan payments on behalf of the consumer should that person incur a qualifying job loss after purchasing the car. One condo developer, taking a cue from automakers, has decided to roll out a similar program for condo purchases in its new development.

No thorns at Thornton Place

Stellar Holdings, the developer of Seattle's Thornton Place complex, is trying to stimulate demand by offering mortgage payment protection on eligible condo purchases. The program covers mortgage payments for up to six months should the buyer suffer a qualifying job loss within 12 months of making the mortgage purchase.

To qualify for the coverage, prospects have to buy a condo before May 25; they also have to choose from one of 27 units designated for this offer. The coverage is capped at a monthly payment amount of $2,500. Assuming a 3.5 percent down payment and a 6.5 percent interest rate on a 30-year, fixed-rate mortgage, this payment level equates to a mortgage purchase budget of roughly $410,000. Qualifying units at Thornton Place are priced as low as $299,950.

Unemployment concerns running high

The question is, will Stellar's customer-focused program be enough to get buyers interested in a condo purchase? In the state of Washington, the unemployment rate hit 8.4 percent in February. This compares to a national unemployment rate of 8.1 percent in the same month. A more recent data release pegs the national rate at 8.5 percent in March, nearly double what it was two years ago.

Prospective condo buyers might wonder whether three months' of payment coverage is going to be enough. Should a job loss happen, it might take significantly longer than that to replace the income. Of course, if those consumers choose to rent instead of buy, they wouldn't have any payment coverage at all.

Incidentally, payment protection on auto loans began with one manufacturer and was quickly picked up by two more. If other housing developers imitate the Thornton Place program, it could speed up a recovery in the housing market by allowing more regular folks to get celebrity-style protection.  Stellar's truly stellar offer might truly stimulate condo buying.