RALEIGH, N.C., Sept. 26 /PRNewswire-FirstCall/ -- Genworth Mortgage
Insurance today announced the launch of a new, safer alternative to today's
interest only loans -- Genworth IO 40.
Different from other interest-only (IO) and exotic mortgage products that
feature short-term, adjustable rate mortgages (ARMS), the IO 40 mortgage
solution allows lenders to offer an insured 40-year mortgage with interest-
only payments for the first 10 years. The loan amortizes over the following
30 years, minimizing the payment bump when the loan begins amortizing.
The low initial monthly payment provided by IO 40 will assist homebuyers
struggling to buy a home in today's high-priced housing markets. And the 10-
year IO term will provide payment stability as buyers build their financial
foundations.
"This new product provides a great combination of low down-payment and low
monthly payment in a safe, stable manner," said Kevin Schneider, president of
Genworth's U.S. mortgage insurance business. "IO 40 embodies our goal of
providing products that not only help get people into their first home, but
keep them there."
The popularity of mortgages offering a short-term "interest-only" period
on payments has soared in recent years, as consumers seek affordable mortgage
options in high-cost housing markets. In California alone, over 61% of last
year's mortgage loans were interest-only.
While offering low initial payments, today's IO mortgages have one
problem. When the interest-only period ends and converts to principal plus
interest for the remainder of the loan period, monthly payments increase
steeply. This can be magnified if interest rates rise. By offering a longer
amortization period (30 years vs. 20), IO 40 substantially reduces "payment
shock" when the interest-only period ends.
Available on loans up to 100% loan-to-value (LTV), IO 40 provides a strong
tool for lenders seeking affordable housing solutions. With this new product,
borrowers know what their payments will be today and what they will become
when amortization begins after 10 years. Compare the difference in today's IO
and new IO 40 for a $417,000 loan:
Today's IO IO 40
Interest Rate 6.375% 6.375%
Payment (Mos 1-120) $2215 $2215
Payments (Mos 121-payoff) $3123 $2627
Payment Increase 41% 19%
Raleigh-based Genworth Mortgage Insurance is part of Genworth Financial,
Inc. (NYSE: GNW)
About Genworth Financial
Genworth Financial, Inc. (NYSE: GNW) is a leading, U.S.-based insurance
holding company, with growing international scope, serving the lifestyle
protection, retirement income, investment and mortgage insurance needs of more
than 15 million customers in 24 countries. For more information, visit
http://www.genworth.com.
SOURCE Genworth Financial, Inc.
CONTACT: Terry Souers, Vice President, Public Relations, of Genworth
Mortgage Insurance,
+1-919-846-4459,
terry.souers@genworth.com
