Genworth steps up mortgage workouts to ease claims

By Al Yoon

NEW YORK, May 28 (Reuters) - U.S. life and mortgage insurer Genworth Financial Inc (GNW.N) on Wednesday said it and loan servicing companies increased "workouts" for troubled borrowers by 30 percent last quarter versus a year ago in an effort to reduce the number of claims.

The workouts, which include lowering monthly payments or modifying terms of the mortgage to reduce foreclosures, totaled 2,872 in the first quarter and 9,240 in the 12 months through March, according to the company.

Genworth is contacting borrowers with the permission of mortgage servicers which in many cases have been overwhelmed by rising delinquencies over the past year, said Chris Antonello, a senior vice president of marketing. The company hopes to raise awareness of its foreclosure prevention effort to stabilize, or reduce claim rates, he said.

The Richmond, Virginia-based company now manages two workouts for every claim it must pay on a delinquent loan, he said. Such mortgage insurers cover loans that cover more than 80 percent of a home's initial value, which analysts say makes them more vulnerable to losses since falling home prices are depleting homeowners' equity stakes to nil in many cases.

"We want to let borrowers know that this (homeowner assistance) benefit exists, and keep that ratio at two-to-one, or better that," he told Reuters. Borrowers often think that mortgage insurance can only benefit the lender, he said.

Genworth in April said weakness in U.S. housing and financial markets was behind a 64 percent drop in first-quarter profit to $116 million. The company also lowered its 2008 outlook.

Borrower awareness has been one of the most frustrating issues for mortgage lenders and servicers as they scramble to stanch losses caused by foreclosures. Many distressed borrowers are uncomfortable speaking with lenders, stemming in part from lack of financial education, Robert Steel, the U.S. Treasury undersecretary for domestic finance, said on Wednesday.

Foreclosure estimates for 2008 continue to rise despite an industry-wide effort, known as Hope Now, to coordinate servicer outreach programs. The crisis has spurred action by U.S. lawmakers, who in the past month have negotiating a bailout package that would ease refinancings for troubled borrowers who have lost the financial leverage of home equity.

Genworth does business with the two biggest U.S. mortgage finance sources, Fannie Mae (FNM.N) and Freddie Mac (FRE.N), and is close to launching "a couple of solutions" that will benefit both parties and the borrowers, Antonello said.

Volume of loan workouts by Genworth and servicer partners was highest in Texas, Florida, Ohio, Georgia and Pennsylvania. (Additional reporting by David Lawder in Washington; Editing by James Dalgleish)