Most Canadians cannot imagine losing their homes, but unexpected financial difficulties can leave homeowners in a challenging situation. Knowing what options are available and understanding the alternatives to foreclosure will often mean the difference between keeping and losing a home.

A successful outcome not only depends on the individual circumstances of the borrower, but, more importantly, on the early involvement of the lender and borrower at the first sign of financial distress. The sooner all parties work together, the greater the workout options available and the more likely homeownership can be preserved.

As an advocate for sustainable homeownership, AIG United Guaranty is a committed partner throughout the home-buying and home-owning process.

The most common causes of mortgage default include the following:

1. Unforeseen Financial Hardship - resulting from job loss, a reduction in income, a change in marital status, or a serious illness.
   
   
2. Homebuyers purchasing close to, or beyond, their financial means - when most of the household income goes towards high monthly mortgage payments, there may not be additional funds available for emergencies.

The Homeownership Solutions Program offers lenders choice and flexibility as they work to keep borrowers with AIG United Guaranty-insured mortgages in their homes.

Once a problem has been identified, lenders are encouraged to take the following steps.

Step 1: Contact the Borrower  

In order to ensure more options are available, the lender must work closely with the borrower as soon as financial difficulties occur. To understand the cause and extent of the problem, the lender should obtain the following information from the borrower:

1. The borrower's current financial condition, their intent to keep or dispose of the property, and their degree of participation in the workout being explored.



2. How long the problem is likely to last based on the borrower’s circumstances.



3. Determine whether regular payments can resume once a workout solution has been implemented.

Step 2: Contact the AIG United Guaranty Loss Management Team

AIG United Guaranty’s Loss Management experts will work with the lender and the borrower to identify the best solution.

Step 3: Review and Identify Workout Opportunities Offered by AIG United Guaranty

Some of the potential options include the following: 

1. Repayment Plans
   Borrowers often recover from temporary financial hardship within a few months, but may not be able to pay off all delinquencies immediately. With a repayment plan, the borrower arranges to make regular mortgage payments with additional, predetermined payments reserved for paying down their arrears.



2. Temporary Indulgence
   This involves skipping or deferring payments in situations where the financial hardship is deemed temporary.



3. Forbearance
   This is a written agreement between the borrower and the lender to reduce or suspend mortgage payments for a specific period of time, until the borrower is able to start a repayment plan. Forbearance arrangements are often encouraged when there is reasonable probability that the borrower can and will recover from delinquency.



4. Loan or Agreement Modification
   This option is usually considered when borrowers have had difficulty making regular mortgage payments after permanent or long-term financial hardship. Examples of modifications include reducing the contract rate to reflect current interest rates (assuming they have decreased since the initial approval) or extending the mortgage terms and amortization.



5. Capitalization
   In some cases, borrowers may be able to continue making their monthly mortgage payments, but not the delinquent payments from previous months. In this case, lenders are encouraged to consider the capitalization of arrears.

To ensure borrowers are given the best opportunity for successful homeownership, it is essential for AIG United Guaranty to work closely with its lending partners at the earliest sign of mortgage delinquency and throughout the recovery process.

AIG United Guaranty is committed to providing the support lenders need to find the right solution for their borrowers. We are dedicated to working with our lending partners to ensure their borrowers can keep their homes and fulfill their dreams of homeownership - today and into the future.

To learn more about the Homeownership Solutions Program, please contact the AIG United Guaranty Loss Management department at 1.866.414.9109 ext. 7001, locally at 416.640.8924 ext. 7001, or via e-mail: lossmanagement@aigug.ca