News Room

September 16, 2005

Keeping Up with Mortgage Payments During Personal Crises A Major Concern Among Many Homeowners, Study Shows

Assurant Solutions Research Finds Strong Appeal for Mortgage Debt Protection Programs Among Both Prime and Sub-prime Borrowers

ATLANTA: A new study shows that many consumers believe they are not prepared to deal with "trigger" financial problems that could affect their ability to keep up with home mortgage payments and living expenses.

Commissioned by Assurant Solutions, a leading administrator of consumer debt protection programs, the study found that the more anxious that homeowners are about potential personal crises - unexpected job loss, a disabling illness, death, etc. - the more likely they are to buy debt protection.

"Borrowers today face a confluence of anxiety-causing events," said W. Michael Balsley, director, mortgage debt business development, for Assurant Solutions. "So much so, that we were able use the results of this survey to develop an index to measure, track and further analyze their level of anxiety.

"Our study showed that the respondents who ranked in the top quintile of our 'anxiety index' were twice as likely to purchase a debt protection program than those in the bottom quintile," he said.

Assurant Solutions said the purpose of the study, which was conducted by Opinion Research Corp. of Princeton, N.J., was to help the company and its lender partners understand what consumers want in debt protection, who would be most likely to purchase the product and how much they would be willing to pay. The findings were based on responses from a statistically representative group of about 1,900 consumers who had obtained a new mortgage, refinanced a loan or arranged a home equity line credit or second mortgage during the past 12 months.

Assurant Solutions provided mortgage bankers a first look at the study's findings this week during presentations at the American Bankers Insurance Association's annual meeting in Phoenix, Ariz.

"Even before Hurricane Katrina ravaged the Gulf Coast, people were worried about their jobs," Balsley said. "And the constant talk of a housing 'bubble' continues to raise concerns that heavily-leveraged borrowers could suddenly find themselves in an upside-down position on their loans."

Balsley said consumers have a high emotional attachment to their homes. "They care a lot more about paying off the mortgage than their credit cards. A homeowner might carry five or six credit cards, but they have only one mortgage or one HELOC."

Key findings from the survey:

• There is a sizeable, highly receptive market for mortgage debt protection products for first mortgages, home equity lines of credit and second mortgages.
• Despite differences in "financial stamina" (how long a borrower can withstand a loss of income before the onset of significant financial problems), the appeal of mortgage debt protection depends more on borrower anxiety, worries and predisposition for insurance-type products than type of loan, reasons for borrowing or savings.
• A product suite with just a few configurations will satisfy most borrowers.
• Demand for mortgage debt protection products is largely price inelastic, and that the "take rate" among borrowers is less driven by price than other factors.
• Mortgage debt protection appeals to both prime and sub-prime borrowers.

Two thirds of survey respondents said they worry about events that might adversely affect their finances, and most who worry expressed multiple worries.

As expected, involuntary unemployment topped the list of borrower worries, with some 38 percent of respondents identifying job loss as their top concern. In fact, in this study, 15 percent of the respondents fully expect that they or their spouses will lose their jobs at some point over the next three years.

Also high in the list of borrower anxieties were disability (29 percent), hospitalization (29 percent) and death of self or spouse (30 percent).

Assurant Solutions said that natural disasters made only a "fair showing" (24 percent) in this survey, which was conducted in early summer. However, concerns about natural disasters probably would be stronger today because of Hurricane Katrina and the media coverage that the disaster has received, the company said.

While divorce is often cited as a major reason that borrowers get into financial difficulties, this study showed it is not top of mind when consumers are buying homes or entering into new loan agreements. Only five percent of respondents cited divorce as a "trigger" event that they worry about.

About Assurant Solutions

Assurant Solutions companies develop, underwrite, market and administer specialty insurance, extended service contracts and other risk management solutions through collaborative relationships with leading financial institutions, retailers, automobile dealers, utilities and other entities. Their diversified product portfolio includes debt protection administration, credit insurance and extended service contracts on appliances, consumer electronics, automobiles, recreational vehicles and boats. With operations in 14 locations, including executive offices in Atlanta, Ga., Assurant Solutions serves clients and their customers throughout North America, the Caribbean and selected countries in South America and Europe.

Assurant Solutions is part of Assurant, a premier provider of specialized insurance products and related services in North America and selected other markets. Its five key businesses - Assurant Employee Benefits, Assurant Health, Assurant Preneed, Assurant Solutions and Assurant Specialty Property - partner with clients who are leaders in their industries and have built leadership positions in a number of specialty insurance market segments in the U.S. and selected international markets.

Assurant, which is traded on the New York Stock Exchange under the symbol AIZ, has over $20 billion in assets and $7 billion in annual revenue. www.assurant.com

Media Contact:

James A. Sykes
Director, Corporate Communications
Assurant Solutions
260 Interstate N. Circle, SE
Atlanta, Ga. 30339-2111
Telephone: 770.763.1015
FAX: 770.859.4325
E-mail: james.sykes@assurant.com