Category: Finance

I received an email a few days ago from a prospective customer. I say prospective loosely because I’m quite sure he won’t become one.

He began by flattering my marketing abilities. Once I was buttered up he opened the door to his true inquiry: How can choosing you instead of another lender, get me the largest cash sum possible from my house?

The truth is that nothing can be done differently. There is a formula, used by all lenders of reverse mortgages, to determine how much cash can be taken out of a mortgage.

So he asks me to use an appraiser that really does a “good job”. Of course this is code for an appraiser who fudges up his numbers to make the loan or transaction work.

The point being for him, a reverse mortgage lender will lend him a greater amount of money if his value comes in higher.

Many seniors have a desire to pay off their traditional mortgage using the reverse mortgage. It’s the number 1 reason seniors are looking at the reverse. But, with waning values, it can be precarious.

Yet the lender can’t at all times loan an adequate amount to fulfill this wish if the appraisal returns too low. So the poor borrower has to maintain payment on the regular loan until his home value increases enough to give it another shot.

Unfortunately borrowers aren’t the only ones struggling; appraisers are as well. For awhile they were able to pad their appraisal reports.

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Well, here is an example of the system that isn’t functioning as intended: a mortgage loan that encourages paying off one debt, in order to overspend ourselves with another debt.

The interest only mortgage and the credit card debt. As a borrowing nation, I believe we’ve reached new levels. It would seem that in this century we’ve managed to take every form of credit possible, extend it to the limit, and then look at them as if to say, ‘You mean you can’t pay?’

What do these loan and credit companies think they’re going to be facing, when the amount of credit and mortgage they’re willing to extend, reaches beyond the acceptable debt to income ratio? Why do they think these limits were established in the first place?

More consumers than ever before owe massive credit card debt. It’s the way to go, many college campus are overrun with representatives from the major credit card companies, eager to extend credit to the young hands of the college student.

Are they as ready to work with them when they can’t pay? No. What about the rest of the crazed, spending public? How do they handle their credit cards? Well, thanks to the interest only mortgage, we can now pay off credit card debt we can’t afford, with a mortgage we can’t afford. Now, that’s progressive thinking.

The service of providing funds or capital for commercial or private reasons comes under the umbrella term Finance. It is also a branch of economics that studies the management of money and other assets. It can be also defined as the management of funds and capital required by a business and private activities. Management of finance has also developed into a specialized branch within the financial sector and is carried out by finance managers.

Simply put these managers arrange money to be lent to businesses or private individuals using either money already available from company accounts or from external lenders. The simple process of optimization is used to receive the most from these funds by reducing the cost of arranging the finance whilst at the same time ensuring returns are high.

The fact is that it governs most of the worlds activities and poor finance management will immediately show up as conditions deteriorate in procurement, production and sales as it affects every sphere of business activities. The finance manager’s job is to maximize profits whilst keeping the risk to a minimum so you can understand why there is a high level of stress associated with this work.