The issue of economy is of a great importance for every country. With this in mind, it is possible to say that government of every state devotes a great number of its efforts to stabilization of economy and attempts to make it profitable. Moreover, it is for a country to guarantee security of deposits for its citizens and make them confident in its financial system. There is a great number of different mechanisms which are created in order to align functioning of the economic system of a state.
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These mechanisms should be both efficient and convenient for people. Citizens of a state should be given some financial help in case of emergency, however, a country should not absorb losses from it and be able to get a benefit from this very procedure. With this in mind, it is possible to say, that both state and people contribute to the development of efficient economic system and influence appearance of some mechanisms which involve different structures and capitals into its functioning. Securitized Reverse mortgage is a mechanism of this sort. Created in order to guarantee stable and sheltered existence of elderly people, it should be both efficient and beneficial for a person and a state. However, there are some aspects in its functioning which should be mentioned.
The Home Equity Conversion Mortgage (HECM) is a special kind of certain agreement between a person and organization which assumes some responsibilities. First of all, an elderly person is guaranteed to be given a loan for him/her to be able to survive. However, the amount of money available for him/her depends on the value of his/her property which is given as a pawn. Moreover, when this person dies, organization becomes the owner of this very property.
The HECM mortgage market is controlled by the Federal Housing Authority (FHA), which main aim is to control all deals of this sort. Moreover, the FHAs guarantee can be taken as a very significant tool in this issue as it is supported by the U.S. government. However, this fact does not mean that this practice is absolutely risk free. The thing is, that there are several important aspects in this mechanism. First of all, the loan sum is determined by the general value of the house and a person is not allowed to exceed it. However, there can be different complications and securitized reverse mortgage can become inefficient and even detrimental.
For example, if a person lives longer than it was expected, the value of the reverse mortgage becomes lower and it can have more time to approach and become higher than the value of the property. Moreover, there are also some fears connected with the ability of a person to spend money given to him/her. It is possible that he/she can exceed the amount of money which is supposed to be given to him/her. Resting on these facts, some models which take these peculiarities into account and calculate possible aftermath and variants for all participants are created. Moreover, being a long termed agreement, securitized reverse mortgage should also take into account inflation rates and fluctuations in the parity of currency.
Having analyzed information connected with the mechanism of reverse mortgage, it is possible to say that it is rather popular nowadays and different models are created in order to guarantee its efficient functioning.