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Underwater borrowers who sell their home typically get a price 13% below the mortgage value.
(Insurance covers the lender, should an owner live long enough to draw more than the mortgage value).
It would lose money in cases where a mortgage holder defaults, and a repossessed property is sold for less than the outstanding mortgage value, even after the mortgage holder's deposit is wiped out.
Reverse mortgage borrowers are required to pay premiums for mortgage insurance, which protects the lender if the homes are ultimately sold for less than the mortgage value, since the government is required to pay the difference to the lender.
A new online tool from the financial Web site Credit Sesame, called a mortgage value map, aims to help simplify mortgage comparison shopping for the purchase of a new home or the refinance of an existing house.
The extra insurance protects the government if the homes are ultimately sold for less than the mortgage value, since the F.H.A. is required to pay the difference to the lender.
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When mortgage values tanked, a bailout was unavoidable.
We optimally price CWMs and take a systemic market-based approach, stipulating that mortgage values and payments should be linked to housing prices and adjusted downward to prevent negative equity.
Frank Pallotta, executive vice president of the Loan Value Group in Rumson, N.J., which provides analysis of mortgage values, said that many investors were worried about the strings attached to government-backed deals.
Mr. McCain also called on Mr. Bush to act now to use the authority of the recent housing bill to start buying mortgages, saying that there was nearly $1 trillion available to do so and that the action would shore up mortgage values.
On the negative side: With those pricy homes come the highest mortgage values in the country.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com