Article:
“The Mortgage Professor: Down payment insurance: Does it make sense? (
Investment in a home is often the largest investment a consumer will ever make, so any measures to reduce the risk deserve careful attention. The big risk is that a major house price decline will wipe out the owners’ equity, leaving them owing more than their house is worth. That happened to many just a few years ago, and millions of homeowners are still under water.
I decided a long time ago that the best way to prevent a recurrence of that episode was to offer homebuyers property value insurance, and I spent some time advising a well-connected group of entrepreneurs on a program that would do that. After several years of effort, however, the program was scrapped. Various legal and operating barriers turned out to be just too formidable.
Recently, however, I came across a new program called +Plus offered by the Dallas-based firm Value Insured with which I have no connection. The +Plus program offers to insure the down payment of homebuyers when they sell their homes after two but before seven years from the date of purchase. That won’t help homeowners who are still under water, but it is designed to protect new homeowners who purchase the insurance when they purchase their home.
Down payment insurance is a far cry from property value insurance, but down payment insurance is available while property value insurance isn’t.”