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Silicon Valley Explores A New Investment: Your Home

https://www.wsj.com/articles/silicon-valley-explores-a-new-i...
beady-eyed garnet sanctuary
  02/18/18
By Peter Rudegeair and Christina Rexrode Feb. 18, 2018 7:0...
beady-eyed garnet sanctuary
  02/18/18
While I admittedly have not done the math to see how this sh...
erotic messiness athletic conference
  02/18/18
This will end well
Idiotic cheese-eating heaven
  02/18/18
...
Chestnut galvanic sweet tailpipe
  02/18/18
...
Dashing Ebony Temple
  02/18/18
It's as if these people didn't live through 2008 Lending ...
Pea-brained spot
  02/18/18
Sofi is actually a 180 idea because they found a way to take...
multi-colored locale
  02/18/18
https://www.bloomberg.com/news/articles/2017-03-13/sofi-s-lo...
Pea-brained spot
  02/18/18
LC was such a fucking fraud man
magenta supple market
  02/18/18
Didn't even take a recession to blow it up. Imagine if and ...
Pea-brained spot
  02/18/18
couldn't make it all the way through this article because th...
Abusive cruise ship juggernaut
  02/18/18
Copy paste tyia First paragraph sounds infuriating
erotic messiness athletic conference
  02/18/18
What if you renovate or need to put up maintenance money? Do...
Outnumbered Fat Ankles Double Fault
  02/18/18


Poast new message in this thread



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Date: February 18th, 2018 1:00 PM
Author: beady-eyed garnet sanctuary

https://www.wsj.com/articles/silicon-valley-explores-a-new-investment-your-home-1518955201

Americans are growing tired of (((Silicon Valley)))

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35430951)



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Date: February 18th, 2018 1:36 PM
Author: beady-eyed garnet sanctuary

By Peter Rudegeair and Christina Rexrode

Feb. 18, 2018 7:00 a.m. ET

40 COMMENTS

Some well-funded startups have an unusual pitch for homeowners strapped for cash: Let’s own this house together.

A handful of companies, including those backed by marquee Silicon Valley names such as Andreessen Horowitz and Mark Zuckerberg’s philanthropic organization, are experimenting with a product that essentially lets them take an ownership position in a house along with the homeowner. The agreements, called shared-equity contracts, provide a new way for investors to get exposure to rising home prices across the U.S.

Shared-equity products are aimed at new buyers who need help with a down payment, or current homeowners looking for an alternative to a cash-out mortgage refinancing or a home-equity loan. The first use has caught the attention of mortgage-finance giant Freddie Mac , which recently agreed to buy loans on properties where one firm, Unison Agreement Corp. , contributes to the down payment.

Home Loan Slowdown

Refinancing and home-equity product volume

Source: Freddie Mac (cash-out refis), Equifax (home-equity lines and loans)

.billion

Cash-out refinancing

New home-equity loans

New home-equity lines of credit

2006

’08

’10

’12

’14

’16

0

200

400

600

$800

In those cases, home buyers get money for part of their down payment in exchange for pledging some of the home’s future price appreciation. The firms market them as a better alternative to low-down-payment loans, since they can give consumers more buying power without requiring them to take out pricey mortgage insurance.

Landed Inc. offers these down-payment contracts to teachers and other educators. Last year, the Chan Zuckerberg Initiative , a philanthropy co-founded by Facebook Inc.’s chief executive, gave Landed $5 million to start a new fund.

Michael Nizhnikov found out about Unison’s shared-equity product from his mortgage lender, Guaranteed Rate Inc. He used it for half of the 20% down payment on a home when he moved to accept a position in the psychology department at Southern Connecticut State University.

Dr. Nizhnikov, 46 years old, said the idea of sharing ownership of his home at first was a bit disconcerting. One thing that won him over: If his home’s value falls, Unison shares in the loss. “We get to feel comfortable, just in case something crazy happens,” Dr. Nizhnikov said.

Rebound

Homeowners' equity in U.S. real estate

Source: Federal Reserve

.trillion

2000

’05

’10

’15

5

6

7

8

9

10

11

12

13

14

$15

The length of the contracts can vary from a few years to 30. Homeowners can repay early, including if they sell their house before the term ends. How much they end up owing depends on how the value of their home changes. Because the funds are equity, not a borrowing, they don’t require monthly payments.

For example, a Unison customer could receive $50,000 toward a $100,000 down payment on a $500,000 house. If the home later sells for $600,000, the customer gets back the $50,000 he or she initially put down plus 65% of the $100,000 appreciation. Unison gets back its $50,000 plus the other $35,000 of appreciated value. (That is keeping the mortgage constant at $400,000 for illustrative purposes.)

And if the home goes down in value? Unison shares in the loss, but not all of it. Say the home sells for $400,000. After paying back the $400,000 mortgage, the homeowner’s $50,000 in equity is wiped out. Unison only shares in 35% of the loss, preserving some of its equity. That means the homeowner is on the hook for the difference and needs to pay Unison $15,000.

Shared-equity contracts can help home buyers unload some risk of a decline in property values, but they can also end up being expensive if housing prices rise. “The homeowners who are going to do this are the ones who don’t have a lot of choices,” said Allan Weiss, who founded a home-price analytics firm that bears his name.

Shared Living

Shared-equity contracts let homeowners and investors take stakes in a house together. In exchange for money, the homeowners pledge a portion of their home’s appreciation.

Here’s how a sample deal works:

A homebuyer and an investor each put in $50,000 to buy a $500,000 house, taking out a $400,000 mortgage.

If the price goes up:

The home sells for $600,000.

The homeowner gets back their $50,000 plus 65% of the appreciation.

The investor gets back their $50,000 plus 35% of the appreciation.*

If the price goes down:

The home sells for $400,000. The investor absorbs 35% of the $100,000 loss. The homeowner loses their $50,000 and owes the investor $15,000.*

* Holds the $400,000 mortgage constant

Source: the companies

Patch Homes Inc., Point Digital Finance Inc. and Unison are among the companies that are marketing these products as an alternative to home-equity loans and cash-out refinancings. Unlike those products, shared-equity contracts don’t add to the consumer’s outstanding debt and tend to have looser qualification standards.

Raju Mann of Marin County, Calif., took out about $85,000 through a shared-equity contract on her home from Point in 2016. She was encouraged by the startup’s shareholders, which include Andreessen Horowitz and former Citigroup Inc. CEO Vikram Pandit.

Ms. Mann, 54, said banks rejected her for loans because her sources of income—including royalties on the sale of books written by her grandfather, Nobel Prize-winning author Thomas Mann —were unpredictable.

After getting funds from Point, Ms. Mann used the money to pay off debt. Home prices were rising in her neighborhood, though, and the longer she waited to pay back Point, the more the firm would make. She decided to exit her contract last month, using money she got refinancing her existing mortgage. Ultimately, she wound up paying Point around $120,000. “They made good money with me,” Ms. Mann said.

The market for shared equity is embryonic. Unison said it has done 600 agreements in the past year; the other firms have done fewer.

To the firms, the idea is to give homeowners the same option that companies have in raising funds via both debt and equity. The firms also typically charge fees for arranging the contracts.

Raju Mann's home in Novato, Calif. Startups are offering homeowners new equity products.

Raju Mann's home in Novato, Calif. Startups are offering homeowners new equity products. PHOTO: BRIAN FLAHERTY FOR THE WALL STREET JOURNAL

For investors, yields can be attractive. Kingsbridge Wealth Management Inc., a Las Vegas multifamily office, has placed about $3 million into a fund that Point manages since May 2016, earning an internal rate of return of roughly 16%, said Kingsbridge President David J. Dunn.

But there is also risk that investors’ capital will be tied up for years before recognizing any gains.

High-school biology teacher Sara Shayesteh and her husband, Isaac, used an agreement with Landed to cover about half their down payment for their home in San Mateo, Calif. That followed a discouraging search for homes where they kept getting bested by buyers with bigger down payments.

The Shayestehs have 10 years to repay Landed, but can choose to do so after one year. They said it feels odd to have an investor own part of their house but are grateful for the arrangement. “We’re trying to live in a crazy area with a market,” said Ms. Shayesteh, 32. “There’s no other way we could have purchased a property that would have met our needs.”

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com and Christina Rexrode at christina.rexrode@wsj.com

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431125)



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Date: February 18th, 2018 1:41 PM
Author: erotic messiness athletic conference

While I admittedly have not done the math to see how this shakes out compared to other financing options, my initial reaction is that proponents of these loans should be hanged in public.

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431151)



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Date: February 18th, 2018 1:04 PM
Author: Idiotic cheese-eating heaven

This will end well

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35430977)



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Date: February 18th, 2018 1:10 PM
Author: Chestnut galvanic sweet tailpipe



(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431011)



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Date: February 18th, 2018 1:14 PM
Author: Dashing Ebony Temple



(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431023)



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Date: February 18th, 2018 1:11 PM
Author: Pea-brained spot

It's as if these people didn't live through 2008

Lending Club, On Deck, Sofi, Affirm, etc

They're all like wow you can make a lot of money in this alternative finance space and wondering why there is no banking competition in it anymore

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431017)



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Date: February 18th, 2018 1:17 PM
Author: multi-colored locale

Sofi is actually a 180 idea because they found a way to take advantage of the increasing polarization of classes in America.

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431033)



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Date: February 18th, 2018 1:20 PM
Author: Pea-brained spot

https://www.bloomberg.com/news/articles/2017-03-13/sofi-s-loan-losses-pile-up-as-even-wealthy-borrowers-default

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431052)



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Date: February 18th, 2018 1:19 PM
Author: magenta supple market

LC was such a fucking fraud man

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431046)



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Date: February 18th, 2018 1:22 PM
Author: Pea-brained spot

Didn't even take a recession to blow it up. Imagine if and when the downturn comes

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431058)



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Date: February 18th, 2018 1:17 PM
Author: Abusive cruise ship juggernaut

couldn't make it all the way through this article because the sound of hands rubbing together became too deafening

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431036)



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Date: February 18th, 2018 1:21 PM
Author: erotic messiness athletic conference

Copy paste tyia

First paragraph sounds infuriating

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431056)



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Date: February 18th, 2018 1:35 PM
Author: Outnumbered Fat Ankles Double Fault

What if you renovate or need to put up maintenance money? Does the investor put up 35% or else get diluted? I assume not.

(http://www.autoadmit.com/thread.php?thread_id=3896727&forum_id=2#35431118)