Jack Kemp forwards this.

FHA reverse mortgages are in the red, and taxpayers could be on the hook for a bailout

Why are reverse mortgages such a loser for the FHA? Are the valuations the FHA give too high? Are there in fact zero resale value on dumpy houses in run down neighborhoods? What's going on here?

A word from Tim, a Real Estate guy:

Bingo on all, Jack, but especially that last. And bear in mind that they are giving money in return for equity in a house that is still being occupied by elderly people - and the house in''t being maintained. Remember, what they are doing is paying people for future possession of the property - rather like buying a car from someone but not getting it from them for several years. How much would a car depreciate in this time frame? The same is true of a house, and since it's for elderly people who cannot maintan it properly it makes matters worse. And FHA loans are for people with shakey credit anyway, so the qualifications are minimal. Really, these things aren't loans at all but a sort of government buyback of a house which may be in poor condition by the time the government takes it. The borrower can live there for the rest of their lives by the terms of the agreement after taking the money.

Imagine buying a care from somewho who then keeps it for another fifteen years. No sane person would make that deal.

Posted by: Timothy Birdnow at 11:30 AM | No Comments | Add Comment
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