These are often bought to cover a mortgage, which also decreases over time as the capital is paid off.
A second would be to squeeze the definitions of conforming mortgages over time, so that bit by bit Fannie and Freddie lose control of chunks of the prime market.
Ms Smith writes:So effectively, the borrower gets a teaser that over time adjusts to a fixed rate mortgage at current (low) interest rates.
But they are presently only looking at the five largest mortgage companies -- Bank of America, Wells Fargo, JPMorgan Chase, Citigroup, and Ally Financial -- while promising to examine other large mortgage firms over time.
So, I give you a mortgage, and over time you're going to pay interest to me, and that interest will be the income.
Just as people take out a mortgage over that time period and see a return on their home investment, so government could do the same.
To make matters worse, the losses incurred by those who engineered this crisis were largely socialized, meaning that these same people being bled by vampire mortgages will, over time, have to pay the banks' debts from the housing bubble as well as their own.
A loan would likely be tacked on to the mortgage, for repayment over time.
(Since reverse mortgage balances grow over time as interest accrues, these costs will rise over time, too).
Considering that inflation is in part the reason for this excess interest risk, it seems natural to redesign mortgages in such a way that over time mortgage payments could, at least in part, reflect inflation.
