Unemployment is rising, and the list of builders offering buyers a financial backstop in the event of temporary joblessness is expanding. Their unemployment protection plans may be marketing tools primarily, but some builders intend to keep them around even after the recession subsides.

Lenders and mortgage companies have offered unemployment protection for years. And since the beginning of 2009, a growing number of builders—including Lennar, Toll Brothers, Ryland, Meritage Homes, and Taylor Morrison—are promoting it. Kelly Fink, regional marketing and Internet manager for Atlanta-based Bowen Family Homes, says her company launched its Safety Net program in February after hearing prospects say they would buy a house but were scared about being laid off. That fear is well founded since the U.S. Treasury estimates that the country’s unemployment rate, at 8.1 percent in the second week of March, could shoot past 10 percent by 2010.

Here’s how these programs work: A buyer is enrolled automatically, and if he or she involuntarily loses a job within two years of buying a house from the builder, the program covers the owner’s mortgage payments for several consecutive months. Depending on the builder, the monthly payments covered can range up to $2,500 per month for six months.

Bowen’s Safety Net and Lennar’s Peace of Mind programs are underwritten by nonprofits. Bowen pays between $350 and $400 each to enroll buyers in AmeriDream’s Dream Keeper Mortgage Payment Relief program. Lennar is enrolling buyers in programs offered by the Rainy Day Foundation. Each group’s programs go beyond unemployment protection to include tools to counsel and financially assist homeowners who experience unforeseen short-term money problems.

UNEMPLOYMENT BENEFITS: Lennar is enrolling its buyers in a mortgage protection plan that’s underwritten by the Rainy Day Foundation.
UNEMPLOYMENT BENEFITS: Lennar is enrolling its buyers in a mortgage protection plan that’s underwritten by the Rainy Day Foundation.

Rick del Sontro, Rainy Day’s CEO, explains that builders or their mortgage affiliates pay between $550 and $600 per customer for services that would cost a buyer as much as $1,200 if purchased through a bank. The foundation’s programs, which target FHA mortgage borrowers, are more comprehensive, he notes, because they provide pre- and post-­purchase counseling and budgeting advice. Those enrolled can also tap into a pool of funds that the foundation dispenses as grants to owners who encounter short-term problems paying their mortgages such as a medical emergency. Last year, Rainy Day paid out grants totalling $4 million, which del Sontro expects to double in 2009.

There’s no question that builders are promoting unemployment protection to stimulate sales. Fink says Bowen’s marketing for its ­Safety Net program targets both buyers and Realtors. Toll Brothers introduced its program in February as a three-month test. “If it’s selling homes, we’ll extend it. If it isn’t, we won’t,” says Donald Salmon, president and CEO of TBI Mortgage, which gets 95 percent of its business from Toll.

On the other hand, Main Street Homes in Austin, Texas, is likely to keep its programs going after the market recovers. “It’s becoming part of who we are as a locally owned builder,” says vice president of sales Greg Smith. Main Street has been enrolling buyers in the Rainy Day emergency fund for several years and started offering unemployment protection through its lender, Scottsdale, Ariz.–based imortgage.com, at the beginning of 2009. As of Feb. 22, Main Street had sold 70 homes, and Smith is convinced that many buyers were attracted to the protection plan.

Learn more about markets featured in this article: Atlanta, GA.