How can you stop one of your unemployed borrowers from winding up in foreclosure? Help them get a job.
That’s just what one subprime company has set out to do.
Several hundred unemployed NovaStar Mortgage Inc. borrowers have sought help through a job counseling and placement service the company launched for borrowers who are delinquent on their loans. Underemployed borrowers — those which don’t earn enough to maintain their payments — are also eligible for the program.
When people are laid off, they “can quickly become overwhelmed with their inability to support their families and pay creditors,” said Chris Miller, a NovaStar servicing vice president who co-created the program, in a written statement.
“Since most Americans haven’t faced unemployment, they lack experience in the practical ‘how-to’ of looking for a job,” he added. “That’s where we can help.”
The net branch initiated the program in August by hiring two career counselors in Kansas City to help borrowers throughout the country with developing resume writing and interview skills, connecting with search firms, using employment databases and applying for jobs that match their skills and experience, NovaStar spokesman Mike Enos told MortgageDaily.com.
Currently, 275 people are using the program. Since inception, about 35 people have found jobs with an average time of 25 days to reemployment, including a Kansas City woman who landed a part-time job with NovaStar, according to the spokesman.
The borrowers are referred to the program by NovaStar collectors when they learn job loss or underemployment is the reason why the mortgage is delinquent.
As opposed to general career counseling services, the added benefit in using NovaStar’s program is that it helps borrowers manage their delinquent loan. “If they choose to work with the career counselors, we will not proceed with next steps, whatever those steps may be, with regard to their mortgage,” Enos said.
And because it is likely borrowers will start making mortgage payments again when they become employed, but it is unlikely that they’ll have “a big chunk of money” to make current a loan 60 to 120 days past due, the program aids that situation also, Enos said.
Once a customer has a new job and demonstrates employability for approximately 90 days, NovaStar loss mitigation specialists will begin restructuring the debt at no added cost to the customer. Restructuring may involve bringing the loan current by moving the past due amount to the end of the loan and extending the term. If the customer regains employment in a lower paying job, NovaStar will consider modifying the rate and term to make the loan more affordable, the lender said.
“Foreclosures are pretty costly and that, ultimately, is not a benefit to anyone,” Enos said. The program “saves us from the costs of foreclosure and certainly helps the borrower by being able to stay in their home.”