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作者:焦點 来源:探索 浏览: 【大中小】 发布时间:2024-11-10 01:50:38 评论数:
Point is promising to do something radical -- changing how homeowners fund their mortgages and think about the value of their homes.
Proponents say it could change the financial realities of millions of Americans. Critics agree, but worry it could be for the worse.
Point offers homeowners the chance to sell a stake in the equity of their home. When homeowners sell their house, Point gets that stake back. For instance if your home is worth $100,000, Point could take a 10% stake and give you $10,000. If you sell your home for $200,000, Point would get $20,000 from that.
The upside of the system is that it provides a way for homeowners to get an influx of cash without taking on more debt through refinancing. It also lowers the total cost of a mortgage and the interest paid on it.
The company has been in the news this week after it raised $8.4 million from prominent investors. Andreessen Horowitz led the startup's Series A round as well as an earlier seed round.
Point doesn't technically own part of your home, but instead owns the option to part of your home. If a homeowner defaults, Point could initiate a sale. Additionally, if your home declines in value, Point "may be due less" that the money it gave to the homeowner.
Experts say this idea isn't new. Banks have experimented with the idea of equity versus debt in home financing for at least 25 years, according to Lawrence White, a professor at New York University's Stern School of Business who has studied mortgage markets.
"It wouldn't surprise me if anyone lending against somebody's castle or somebody's estate in 16th century England would have said, 'Why don't I take a piece of equity and why am I lending?'" White said.
Point says that its smaller ambitions and market share make the idea that has failed for banks a feasible option for the startup.
"The space has quite a history. In the commercial world, these types of arrangements are not uncommon at all," Point co-founder Eoin Matthews told Mashable.
"It's a small market segment to begin with. If I do mortgages, I need to do tens of thousands to be successful. But we can afford to go after a market that's much smaller," Matthews said.
Point promises an alternative to refinancing.Credit: screenshot/pointSo far, Point has signed agreements with 50 homeowners, mostly in California. All Point customers already owned their homes and were an average of 11 years into their mortgages.
They signed 10 year agreements with Point — a number compromised on because the typical 30-year mortgage contract was too long for investors and five years was too short for consumers.
The customers who have signed on so far agreed to give up equity in their homes for a few specific reasons. Some used the influx of cash from Point to pay off debt instead of pursuing debt consolidation, and others who had trouble securing small business loans used the money from Point as an alternative.
SEE ALSO:How to tame your student loans (told in under 350 words)Even though the idea behind shared equity mortgages is old, the potential to bring it to mass segments of the consumer economy is still new — and worrying for some.
What happens when a homeowner wants to make changes to their home, and another party is invested in its value? What if homeowners won't upgrade their homes because they know any value in appreciation will just go to Point? What if homeowners aren't ready to — or can't — sell when their contract with Point expires and they have to pay the company back in cash?
And, perhaps most importantly, what effect would widespread use of shared equity mortgages have on the housing market?
Point says homeowners won't have to get permission from the company for anything outside of the house's financing. (So no approval needed — or funding provided by Point — to redo a kitchen or put in a pool.) But Point would have to approve any subsequent refinancing after homeowners enter an agreement with the company. And homeowners are required to keep their homes up at least to the condition they were in when Point signed on.
SEE ALSO:In housing, tech employees get yet another advantagePoint — and experts — agree that homeowners will have less incentive to fund major home improvements when signed with Point. White, from NYU, says that's the main reason he's skeptical of Point's potential.
And if homeowners aren't ready to sell when their 10 years are up, then that's something they'll have to discuss with the company.
But as for the housing market, experts say this is actually good for the economy.
"If we had these types of mortgages in 2005, then the crisis would not have been as severe," said Arvind Krishnamurthy, a finance professor at the Stanford Graduate School of Business. "Homeowners would not have been squeezed as hard between high mortgage debt and reduced income. The foreclosure crisis would have been smaller, and banks would likely not have been hit as hard."
Point, of course, is enthusiastic about its potential, but its high-profile announcement this week attracted some criticism. Critics either think Point's product is bad for the investors pouring money into homes or the homeowners giving up equity.
In a blog post announcing their Series A round, Andreessen Horowitz extolled Point's potential for investors.
"Point brings diversification to residential homeowners (diversify out) andinvestors (diversify in). It’s not like a home equity line of credit (HELOC) or a mortgage with monthly payments; it’s an aligned investment — that is, equity," Andreessen Horowitz general partner Alex Rampell wrote. "It’s rethinking the fundamentals of residential real estate ownership — making single-family residential real estate a liquid, tradeable asset class."
The average investment Point makes in someone's property is $80,000, Matthews said. The company is in the junior lien position and if a house depreciates gets any money after the bank providing a mortgage and before the homeowner.
Point is looking to move beyond California, but regulations differ by state so the process will take time. The company also might introduce a down payment option to supply funding for new homebuyers rather than just those already locked into mortgages, but it's proceeding cautiously since that has more potential to inflate housing values, Matthews said.