WASHINGTON — Is there a rainy day in your personal job forecast? That wouldn't be surprising — not with unemployment rates in double digits in several states, 8.2 percent nationwide and widely expected to hit 10 percent or higher by next year.
Nor would it be surprising if uncertainty about your income is a major barrier keeping you out of the home-buying market this spring. Which is why a previously obscure charitable group based in Washington, D.C. — the Rainy Day Foundation — suddenly is doing a booming business in what's called the mortgage payment-protection niche.
According to CEO Rick Del Sontro, Rainy Day is now offering job-loss-protection coverage and home-buyer financial counseling through approximately 100 builders and lenders across the country, plus two large real estate brokerages.
Some of the clients and partners are big: Lennar Corp, for example, is active in 17 states including Arizona and California. Long & Foster Real Estate is the largest independent realty brokerage in the country.
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Here's how the Rainy Day plan works: Consumers buying homes through a participating builder, lender or realty agency can qualify for up to six months of mortgage payments — capped at $1,800 per month in some versions and $2,500 in others — if they lose their jobs during the two years after their closing. There is no direct cost to the buyer. The insurance coverage is underwritten by Virginia Surety Co. Inc.
Purchasers may also be eligible to receive "emergency fund" grants if they encounter short-term financial drains such as unexpected medical bills.
The emergency fund is designed to "bridge the gap" and keep full payments flowing for a month or two following an unanticipated financial problem. If the owners have only $1,000 available in a given month, but their mortgage bill is $1,500, Rainy Day contributes the missing $500.
The emergency grants are not extended to everyone who is in a jam: Rainy Day won't provide extra money when individuals have been financially reckless. Nor will it give grants in divorce or separation situations, or other problems attributable to actions by the homeowners themselves.
Lenders and builders pay $550 or more to Rainy Day for each participant in the plan. The money funds the premiums for the basic insurance coverage as well as the emergency fund.
Toll Brothers Inc., a publicly traded luxury builder with 250 projects in 21 states, recently began a major push with its own version of the idea, offering maximum payment coverage up to $2,500 a month for six months over a two-year period.
From a consumer perspective, job-loss protection — insurance coverage worth up to $15,000 (six months times $2,500 maximum) of monthly mortgage debt — sounds like a no-brainer.
But there are some wrinkles you need to know about upfront:
• Though there's no direct cost to the buyer, that doesn't mean it hasn't been tacked on subtly somewhere in the deal — possibly in the price from the seller or builder.
• There are key exclusions and coverage limits. For instance, the Rainy Day program doesn't kick in for two months after closing. Self-employed persons, independent contractors and active military members are not eligible. There's a 30-day waiting period after you lose your job before the first insurance payment is made.
• The Toll Brothers plan is available only to buyers who use the company's affiliated lender, TBI Mortgage Co. Consumers who know of a forthcoming layoff are ineligible. The program excludes seasonal shutdowns.
Bottom line: Even when it's "free," read the fine print.