Double, double toil and trouble, Here comes another bubble!
- Posted by admin on December 11th, 2008 filed in Reverse Mortgage Info
- 3 Comments »
“Wait a minute, you mean now I can buy a house with a reverse mortgage, live in there and a bank pays me. And the only thing I need to qualify is a Life Insurance policy set for the mortgage amount?”
I stood there and scratched my head. So now out of all types of blunders the US has commited in six years of deregulation, here comes one inline with NINJA loans and option Arms.
Reverse Mortgages pay you to live inside the home. Based on the equity of course. But as we have discovered, Equity can vanish quickly when there are too many sellers and too few buyers.
To qualify for a Reverse Mortgage, you need to be older than 62 Y/O. The government pbacks this program, and you dont have to pay anything, just have your insurance policy made payable to the note holder for the amount of the mortgage and you descendants get a home all clean and paid off.
One issue though, why would an insurance company do anything as stupid and pay the full balance on a house giving an insurance policy to someone who can never live long enough to pay the average 200,000 mortgage/ insurance policy.
AND NOW FOR SOMETHING COMPLETELY DIFFERENT, WELL SORT OF!
The majority of the Americans accepted into the government program to rework the mortgage numbers with banks are double defaulting. Maybe the reason is the government is giving the banks an incentive by reworking the terms by not reducing the principal significantly and therefore artifically trying to stabilize the current home prices.
Is it really that blind to them, that although painful, America needs to go through some pain to make sure they are spending less than they are making, actually saving their money and make wise buying decisions?
Artificially trying to make the shift back into positive is not well though out, especially since the government itself is now carrying most of the risk.
Buy the banks toxic assets in bulk at .50 on the $1.00. If the banks dont come, the fed doesnt buy.
The Fed goes back to being lender of last resort, which it is better suited for. Not the above explained. If enough people do this, insurance companies would need to shutdown, or get bailout money 10 years from now.
Found here.
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December 11th, 2008 at 2:22 pm
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December 14th, 2008 at 12:35 pm
I find the following words in your post, troubling – “your insurance policy made payable to the note holder for the amount of the mortgage and you descendants get a home all clean and paid off.”
My question to you is, is there a mortgage transaction of any type out there that DOES NOT require the mortgagee be listed on a homeowner’s policy via the mortgagee clause endorsement?
As an insurance agent for 36 years and currently a reverse mortgage originator in CT, the answer is NO.
Then you ask, “One issue though, why would an insurance company do anything as stupid and pay the full balance on a house giving an insurance policy to someone who can never live long enough to pay the average 200,000 mortgage/ insurance policy?” (my ? mark)
Answer: Insurance companies are promising to repair the home they insurance if there is damage from an insured peril. Not guarantee a loan payment. So if a home is insured for full replacement cost, and the mortgage value is at or less than the replacement cost, then the circumstances are win/win for both parties. Insurance companies are not concerned with a borrower?s ability of paying the full value of a loan. May sound “stupid” to some, but repair or replace value is the focus of insurance company’s business. (From John at jkaravas.com)
December 27th, 2008 at 7:51 pm
Great Article, Very Interesting Read thanks