Quote:
Originally Posted by Plinker
The Realities of a Reverse Mortgage the Salesman Won’t Disclose
Mary has a home worth 6 apples and is very, very hungry.
Farmer Jim gives Mary 3 apples (half the value of her home). If Mary eats all of her apples and passes away, farmer Jim gets her home because Mary now owes farmer Jim far more than the house is worth.
When Mary passes away her home is now worth 8 apples but due to fees and interest she now owes farmer Jim 10 apples. Mary had hoped to leave her home to her only heir, a sweet little lamb. Unfortunately, if you recall, Mary was very, very hungry and she owed more apples than the home was worth.
Farmer Jim sells the home for 8 apples and then hits the townsfolk up for the remaining 2 apples.
Oh, I almost forgot. Before sealing the deal, farmer Bruce (oops, I mean Jim) invites Mary over for a free, fried-chicken dinner.
Introducing the cast:
The trusting yet vulnerable Villager is played by Mary
Your substantial home equity is played by the apple
Your heirs are played by the sweet little lamb (really gonna miss you!)
The burdened taxpayers are played by the townsfolk.
The sketchy RM salesman and lender is played by farmer Jim
Oh and the fried-chicken dinner was anything but free. Mary paid for it.
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Your analogy is without substantiation. Its quite evident that you know very little or nothing about reverse mortgages. I am not an advocate of RM nor do I work in the mortgage industry, but I have had a reverse mortgage and know how they work. Its highly unlikely that in an appreciating market Mary would owe the lender more than the house is worth. If it were the case that Mary owed the lender more than the property is worth the lender eats that difference as a business loss. Explain how you see a normal business loss as burdening 'townsfolk' any more than any other business loss. If you want to attack the concept of RM post some believable and verifiable situation rather than your 'Fairy Tale'.