affordable housing issues whats the fix "Shared Equity fix"

[Jay Hinrichs]

Way back in the late 80s in the SF bay area Peninsula as tech took off RE prices took off.. what was 50 to 100k houses in a few short years were now at 400 to 600k.. And first time homebuyers were getting squeezed out like you see today. 

What was common in those days was for an investor to put up the down payment and the first time homebuyer got the loan and the investor and homeowner did a JV on the property.. the down payment was the major stumbling block for most of these buyers so the banks did allow an investor to put up the 20% down needed. And the owner occ to pay the payments. the investor and owner would then cut terms between them.. Generally a 5 year split the profit or some other arrangement.. but this worked well getting these high priced homes to move to first time buyers.. But then of course banks started to take those loan programs away and then we ended up with the fha stuff and vA stuff..

I think this could work again if the regulators would allow these arrangements.  Thoughts ???

[Chris Seveney]

Quote from @Jay Hinrichs:

Quote from @Michael K Gallagher:

I've always felt there had to be a solution similar to this. it seems like a win all around to me. The occupant has the pride of ownership, the investor has stake in a asset that is leveraged and the bank gets a note with a lower LTV and theoretically less risk than an FHA or VA loan.

  I generally think things like this, or "equity share" type structures are a great solution, not sure to your point how to make them work in a modern environment, but conceptually I'm a big fan.   

if lenders would allow this it would really put those that want to buy a home to live in but are priced out into home ownership.. its a win win for both parties frankly. But I guess its just to easy of a solution .:)

 The issue is also not the lenders but the court systems, I actually discussed this with my attorney on some of the deals that we took back in foreclosure and sell them with an equity share program. He noted some states still view it as predatory since you aer getting the upside the owner is building by making the payments. To me that is dumb as that is how it works in commercial real estate with partners etc., but some court will look at it as taking advantage of that person. As you get some pissed off person who sues you and says they paid all this interest and principal over last 10 years now you get the upside... 

Another option I believe that could work is land leases. You give someone  a land lease on the property and they buy it subject to the land lease and are required to maintain and take care of the property. Could do 50 year land leases to allow people to get 30 year mortgages and the person still owns the land and the borrower owns the house. After 50 years it reverts back to the owner of the land. The buyer would not be paying full cost of land and home for the property, basically buying the structure and renting the land, which in most places its not the home that drives the price its the location/lot price.