HEFI (Home Equity Fractional Interest): A Solution To The Housing Crisis?
Sometimes when I wake up in the morning and look in the mirror, I think to myself:
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You are not the smartest guy in the room.
And in their presentation, they talked about an instrument that could not only potentially could solve the problem of negative equity for existing homeowners, but also potentially help jump-start home sales of new homes at the same time.
Sound like something too good to be true?
That’s what I thought until I heard them talk about it.
And the more they talked, the less skeptical I became.
HEFI: Home Equity Fractional Interest
The HEFI program provides a solution to three different problems we face today:
1. For homeowners who currently owe more than their home is worth, a HEFI Agreement could be utilized to reduce the principal balance of the loan in exchange for a passive equity interest in the property to the Lender / Servicer who agrees to reduce the size of the loan to make it affordable for the homeowner.
2. For homeowners who currently have equity in their home but wish to convert some of that equity into cash for some reason, a HEFI Agreement could be used rather than a second mortgage or a HELOC. A HEFI is not a debt instrument – it is an equity instrument.
3. For people who are not yet homeowners, a HEFI Agreement could be provided by a builder, developer or municipality where the HEFI Agreement would facilitate down payment support by a third party to reduce the overall cost of a new home purchase.
Is the HEFI program the solution that can lead us out of the housing crisis we are currently in?
If the HEFI program can really provide a solution to the above three groups of people, I think it has a chance.
And if it takes off, you heard it here first.
Which makes me one of the average guys who heard it from the smartest guys in the room — and then told more smart people about it.