Housing Bubble
Program to allow homeowners to occasionally skip a mortgage payment
Homeowners can occasionally skip a monthly mortgage payment to better handle their cash flows - and even take vacations - under an innovative program now available at Hibernia National Bank (NYSE: HIB), one of only 12 banks across the country offering this low-cost mortgage option.
Hibernia PaymentPower gives consumers the option of skipping as many as two payments a year, or a total of 10 installments over the course of a traditional 30-year mortgage, with no adverse impact on their credit rating. Individuals taking advantage of the new program would have their loan recast each time they skip a payment, so there would be a very small increase in their monthly note. But, the interest rate and the number of years left on the loan would not change.
"This is an excellent feature that doesn't cost customers anything upfront at closing, but allows them financial flexibility," said Paul Peters, president of Hibernia Mortgage Banking. "There is a small fee charged each time a payment is skipped, but it's totally up to the customer whether to skip a payment and how and when to use the proceeds. Whether you want to take a trip, underestimated your tax burden or need more money for your child's college tuition, this program can help."
Hibernia, which is Louisiana's largest home-loan lender and a top-50 national mortgage company, is one of only 12 banks in the nation to offer PaymentPower under a pilot project sponsored by Fannie Mae, the government-sponsored mortgage-banking enterprise. Peters said the bank began offering PaymentPower to customers in February, and, so far, about 200 borrowers have taken advantage of this option for their mortgage loan.
"It's really starting to take hold," Peters said. "We price these loans exactly like we price a normal, 30-year fixed conventional loan, so there's no reason not to take advantage of the product. It's a free insurance policy, so to speak."
When Fannie Mae first contemplated the PaymentPower program, officials thought it would be well suited for first-time homebuyers or for individuals such as teachers or freelancers whose income flow can vary month to month. But Hibernia is finding that the option is appealing to customers across-the-board.
"The option is free at the time of closing, and it does not involve any additional closing costs or a higher interest rate. When that's explained to our borrowers, more and more are opting for Hibernia PaymentPower," Peters said.
Under Hibernia PaymentPower, individuals can qualify for the skip-payment program after paying the first three months of the mortgage, as long as their loan remains in good standing. To use the program, customers simply notify Hibernia that they would like to forgo their next monthly payment. The skipped payment is then added to the remaining mortgage loan balance and the monthly payment is recalculated. The interest rate remains the same, and the term of the loan remains the same, but the monthly payment would be slightly higher.
If a customer signs up for PaymentPower, he or she is not required to skip a mortgage payment. Individuals who are part of PaymentPower also can refinance their loan just as they would with any other mortgage product.
"It is an excellent program. It's a new twist that allows people to manage their money more effectively, and we're very pleased to be a participant," Peters said.
Source: Hibernia Corporation
