An interesting article about reverse mortgages and some of the risks to a lenders balance sheet appears on the interest.co.nz site which is based on an item in the Financial Times.
It focuses on the dangers of a no negative equity guarantee (NNEG). This applies where the outstanding balance of the reverse mortgage is greater than the proceeds of a sale. This can arise if the mortgagee has greeter longevity than provided for at the beginning or the price of houses goes down. The articles pose the question; are lenders provisioning enough capital against the risks in this type of lending?
If their is no NNEG and the proceeds of sale are less than the outstanding balance the mortgagee or the executor of the estate will have to have to put cash on the table to clear the mortgage debt. You can imagine the reaction of these people when asked to stump up cash.
If there is a NNEG and the proceeds of sale are less than the outstanding balance the lender eats the shortfall.
A cure for cancer and alzheimers plus a ban on foreign house buyers are not beyond the bounds of reason. It would be a shame if Jeff has to go around machine gunning his reverse mortgagees to maintain solvency.
https://www.interest.co.nz/opinion/9...ebt-piled-your
https://www.ft.com/content/ddce25d0-...a-eeb7a9ce36e4
Boop boop de do
Marilyn