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It is unfortunate that the term outsourcing is used for services within and outside the United States. There is a world of difference between them.
Outsourcing in the United States generates jobs and revenue for many local economies while providing direct oversight and communication between the outsourcing company and the company performing the work. This is why outsourcing in the US is also called Outsourcing Collaboration.
Contrast this to outsourcing overseas or offshoring.
"Seven years ago, MIT instructor and design for manufacture engineering expert David Meeker co-authored a report which concluded that manufacturers were overlooking many of the costs associated with outsourcing production to low-labor countries such as China." In a new, updated report Meeker states, "Aside from unexpected events, hidden costs exist because complete costs are rarely allocated to the product and reside instead in corporate overhead budgets," this latest report states. "This distorts fair comparison of domestic and offshore manufacturing, leaving labor rates as a common, central metric."
When we compare the costs between outsourcing collaboration and offshoring, we rarely measure it as apples to apples as there is much additional overhead that is required for offshoring. If costs were examined on a level playing field, much of the work that is outsourced overseas could be performed in this country. Furthermore, the communication and language barriers that present formidable hurdles for offshoring - which can result in project failure and significant overhead - are minor bumps if they exist at all, in outsourced collaboration projects in the United States.
Outsourcing in the United States helps produce meaningful jobs. The Mid-Hudson Workshop for the Disabled, for example, has been hiring disabled veterans and others with physical & medical handicaps for over 60 years.
"Since the early 1990s, many new customers have been attracted to the workshop by the quality of the work, dedication of the employees, and the cost savings. While IBM helped launch us in 1948 and continues providing substantial work, some of the newer clients include TARGET Stores, Naked Earth Distributors, J.L. Taylor Manufacturing, Pawling Corp., Laerdal Medical Corp., MPI Wax Injection Molding, Stamford Scientific International, St. Francis Hospital and the Poughkeepsie Chamber of Commerce."
The concept of outsourcing collaboration is very positive. It denotes the importance of developing and maintaining a strong relationship between the contracting company and the outsourced company that is doing the work. This two-way communications is very significant since it can affect the outcome of current and future outsourced work. It also allows a company to quickly assess the quality of the finished products and easily receive accurate production status and feedback information.
Collaboration is an important term that business consultants frequently use. It usually involves two parties working together to successfully complete a job. Outsourcing in the US is certainly a collaborative effort; one that is beneficial to all parties, can be perpetuating and most importantly, results in some well done work at a reasonable cost by a local workforce.
Private Mortgage Insurance (PMI) has long been touted as a benefit that allows borrowers to purchase property with less than a 20% down. But who is the real beneficiary of PMI? We are told that PMI insurance pays the lender if we default on our mortgage. While true, it doesn't tell the whole story. There's a lot more you should know.
This is all the lender must disclose:
As part of a "good faith" estimate of closing costs, the lender must provide an estimate of the PMI premium.
At closing and annually thereafter, the lender must notify the borrower of available cancellation options. In most cases, PMI may be cancelled when the mortgage is paid down to 80% of the lower of the selling price or the original appraised value. It will usually be cancelled automatically when the amortization of the loan takes the mortgage balance down to 78%.
What you don't know and they don't tell you:
The borrower is not a party to the mortgage insurance policy. The lender does not have to disclose either the name of the insurer or the amount of the insurance purchased. Yet the buyer typically is responsible for the premiums. Lenders can purchase protection for up to 40% or more of the mortgage amount without disclosing to the buyer any more than the premium amount. For example, you buy a 0,000 home with a 10% down payment of ,000, financing the balance with an 0,000 mortgage. The lender might protect 40%, or a total of ,000, with mortgage insurance with you paying the premium. Proceeds received by the lender from a PMI policy do not offset any deficiency judgment against you, the borrower. They can collect on the policy and still come after you. The PMI insurer can pay anyone along the transaction line for services rendered that either reduce the risk of the loan or reduce the insurance company's expenses. This implies that they can pay commissions to the lender. Understand that it comes out of your pocket. The monthly premium for most PMI is fixed. In other words, as the balance of the mortgage declines, presumably along with the risk to the lender, the borrower continues to pay the same premium based on the risk assessment at the time the loan was originated. While many lenders will consider allowing the buyer to cancel PMI when the value of the property rises so that the 80% loan to value ratio is achieved, they are under no obligation to do so. In my experience, the lender required that I pay for an appraisal done by an appraisal company selected by the them. Also, the borrower must usually provide proof there is no second mortgage on the property. The lender can purchase PMI, for which they pay the premiums, without notifying the borrower. Funds for these premiums may come indirectly from the borrower through points paid at closing or from higher interest rates.
PMI premiums are not insignificant. I looked at a loan statement for one of my recent investment properties. On a loan of approximately 0,000, the monthly principal and interest payment was ,124.93. The monthly PMI was 3.53, or 15% of the P&I. Yet I never knew how much insurance was purchased or from whom. Had I carried this property the 10 or so years requried to reduce the mortgage balance to 78% of the purchase price, I would have paid over ,000 in PMI premiums (nearly 10% of the original loan amount).
In the many recent articles on foreclosures, borrowers are urged to contact their lenders immediately when they run into financial trouble or feel they will be unable to keep their mortgage payments current. They stress that working out an arrangement with your lender is far better than going through foreclosure. Even if foreclosure is inevitable, industry sages recommend working with the lender to facilitate a "short sale," where the selling price is less than the mortgage amount, thus avoiding the stigma of a foreclosure.
Wake up!! If the lender is protected with a PMI policy, will they be more or less willing to work with the you? Why would they offer you extended or more favorable terms or allow a short sale when they need only to foreclose to collect their insurance? Isn't it ironic? You could pay thousands for coverage that helps pit your lender against your best interests. "A banker is someone who will loan you an umbrella, but who wants it back when it rains," said my father.
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