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MOB PRESENTATION
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Closed-end MOB Premium
Calculations
&
Considerations
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The impact of Predatory Lending Legislation:
- Single Premium computations expressly prohibited for loans secured by real estate.
- Amendments to HOEPA do not expressly prohibit single premium but effectively prohibit its use by including single premium amounts in the trigger amounts for high cost mortgage loans.
- No end in sight for Predatory Lending legislation.
- Prohibition of Single Premium on real estate transactions gives carriers a reason to evaluate overall policies and objectives.
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Why is "MOB" touted as a better alternative for consumers?
- Premium amounts will be lower with MOB than with Single Premium for corresponding transactions.
- Total interest charges will be substantially lower than when premiums are financed and interest accrues on the premium amount for the life of the transaction.
- The "pay as you go" concept is viewed as more equitable and consumers can easily cancel the insurance coverage at any time.
Valid Assumptions and Premises???
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Rules for Traditional "MOB" Premium Calculations
- The Declining Insurance Base is the Outstanding Principal Balance.
- Insurance premium is treated as an "other charge". It is neither Amount Financed nor Finance Charge.
- The premium is assumed to be earned, assessed, collected, and remitted at the end of each computational period.
- The premium is not financed.
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