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Beaverton Oregon Real Estate and more: Unemployment insurance? Why can’t we do that for mortgages with a twist?

In the State of Oregon, every month an employer is required to pay in to an unemployment insurance fund so that if someone should become unemployed, due to something other than just being an idiot and being fired, then they can collect unemployment. So why can’t we do something like this with home owners and their mortgage?

Last week, I wrote a featured post that got heated at times about PMI (Private Mortgage Insurance) and I guess it is a big fat lie as it really isn’t insurance. It is a way for someone to just collect funds from a buyer with no benefit to buyers at all. But, to give them the privilege to own a home they probably can’t afford and pay even more for it.

PMI (Private Mortgage Insurance)


So, here is my idea, instead of PMI, why don’t we have buyers (all buyers) put funds into an emergency unemployment fund set up at close that they pay an extra $200 a month on their mortgage, and if they should ever lose their job, death or medical issue, this fund would help them pay their mortgage.

But, here is the twist, when they go to sell their home, if they don’t use the fund, they get all the money back that was put in to the fund! How is the fund paid for and managed? The interest earned on the money stays with the institution holding the money. So, the buyer isn’t losing money and the bank that is holding the emergency funds is also getting paid.

To me, after last weeks post, I have completely decided that PMI companies are a complete rip off and no benefit to anyone but themselves. If they can take $200 a month, so then they can ask the buyer at close of a short sale or foreclosure for repayment of the funds they paid to the bank, then that is just completely stupid to me.

The best part of this plan is that it can be set up without government involvement, and we all now how government involvement is working out in the housing industry right now.

Respect Realty LLC (Expect More)

 

At Respect Realty, LLC our agents believe in 100% dedication to client satisfaction.  We specialize in property and land acquisition around the Portland Metro and Vancouver, WA area. We delight in working with first time home buyers and sellers to guide them from start to finish. Our doors are always open and we are always happy to assist you with your real estate questions.

 

Reach out today, we look forward to talking with you!

 

Todd Clark and Seraina Aguayo (Owners of Respect Realty)

Respect Realty LLC (Expect More)

(503)564-3130

info@RespectRealtyNW.com

www.RespectRealtyNW.com

 

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Comment balloon 11 commentsRespect Realty LLC • July 19 2009 12:10AM

Comments

Hi Todd...Sounds good to me .

Cheers, have a great Speechless Sunday :O)

Posted by Fred Carver Personal Real Estate Corporation, Accredited Real Estate Consultant (RE/MAX Camosun Victoria BC Real Estate) over 9 years ago

I guess I'm with you, Todd - I've never quite understood why that insurance didn't kick in and work when buyers started defaulting on their loans.

Posted by Maria Morton, Kansas City Real Estate 816-560-3758 (Chartwell Kansas City Realty) over 9 years ago

Hi Todd: Sorry but I don't think just the interest on that money would be enough to cover the claims that would be submitted.

:)

Posted by Matt Listro, Your Credit Repair Expert (National Credit Fixers - Matt Listro) over 9 years ago

In the last awful market, back in the 80's, I actually had a seller contact her PMI insurance company and the company worked out with the first trust holder how much they would cover if the seller defaulted.  Going from there, we knew how much we had to get for selling the house.  The seller's credit was protected, the first trust holder was covered, and the PMI company did what they got paid to do.  Silly me, I assumed that's what PMI was for.  

Posted by Margaret Woda, Maryland Real Estate & Military Relocation (Long & Foster Real Estate, Inc.) over 9 years ago

Todd,

"AFTFLACK!

 

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) over 9 years ago

Fred - I'm not very good at being speechless, but I'll try!

Maria - Because it seems they aren't really insurance companies at all. Real my other post, it was a real eye opener.

Matt - No, No, that would just pay them to hold the money. They would only be able to use the money they put in to the account. Basically a forced savings account and less of an insurance policy.

Margaret - Now, that was smart thinking and I bet you got the home sold quickly because of it. Was it this hard to get a short sale through in the 80s also?

Bill  - I think you just made the quote of the month for me, I'm rolling on the floor here!

Posted by Respect Realty LLC, Brokers - Oregon / SW Washington Real Estate (Respect Realty LLC) over 9 years ago

That'd be cool.  I think that it should almost be a mandatory thing.  The only problem is that the government would get involved and mismanaged the funds or something.  Seriously, though.  I love the idea of this sort of account.

Posted by Larry Bettag, Vice-President of National Production (Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001) over 9 years ago

I like the part about the government not being involved. With prices down buyer should be able to afford the increased cost. I'm still thinking about the idea.

Posted by Terry & Bonnie Westbrook, Westbrook Realty - Grand Rapids Forest Hills MI Re (Westbrook Realty Broker-Owner) over 9 years ago

gee, i don't know. how about putting 20% down on a house one can actually afford. i've never paid pmi in my life. and i've been paying mortgages for a lot of years. have never taken a heloc either. improvements were done with cash.

Posted by skeptic over 8 years ago

gee, i don't know. how about putting 20% down on a house one can actually afford. i've never paid pmi in my life. and i've been paying mortgages for a lot of years. have never taken a heloc either. improvements were done with cash.

Posted by skeptic over 8 years ago

Great idea! There must be too much money for the "powers that be" to let something simple like this happen.

And Bill, that was hysterical! Thanks.

Posted by Eric Michael, Metro Detroit Real Estate Professional 734.564.1519 (Remerica Integrity, Realtors®, Northville, MI) over 8 years ago

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