Margin loans and Reverse mortgages are two topics I have
found interesting and would like to share some information with you.
Margin loans
Margin loans are loans backed by buyer’s investments,
typically not more than 50% of the portfolio’s value. In this hot real estate market with high
competition from cash buyers, many buyers have found margin loans a great
tool. The advantages using margin loans
are no closing costs, no prepayment penalty, no appraisal, tax benefits and
etc. There is a downside: a maintenance
margin. Please go to the following link
to read the details.
http://online.wsj.com/article/SB10001424127887323936404578581991623331764.html
Reverse mortgages
What I found remarkable about reverse mortgages is the
statistics:” nearly 1 in 10 federally backed reverse mortgages is in default”
according to this article,
latimes.com/business/realestate/la-fi-harney-20130721,0,111605.story
The horror of reverse mortgage is
well illustrated in the case of Havemeyer of New York against OneWest (whose
subsidiary Financial Freedom Acquisition owns the reverse mortgage note). A mortgage with 9.95% interest, plus a 50%
share of increased value by lender, plus a 2% “maturity fee”, plus a
$33,000 mandatory purchase of an annuity by the homeowner is unconscionably an insult to homeownership.
A consolidated class-action suit in
the late 1990s by a series of California lawsuits had settled $8 millions from
the defendants – Transamerica Corp. Transamerica HomeFirst Inc., Metropolitan
Life Insurance Co. and Financial Freedom Senior Funding Corp. However, even today’s friendlier versions of
reverse mortgages are made too complicated for the elderly borrowers and their
heirs to understand the possible consequences.
Opinions from legal, financial and tax experts are strongly advised
before anyone would take a reverse mortgage.
