Do alternative forms of homeownership, such as shared equity models and rent-to-own programs, present viable alternatives for future homeownership? Can they be taken to scale in a way that can encourage stabilization of neighborhoods and housing markets?
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Shared Equity mortgages work very well at the point of origination and then, separately, at the point of modification.
At the front end, when the outside investor is a nonprofit or government stewarding entity like a land trust, shared equity mortgages are valuable tools to preserve the continuing affordability of homes and to maintain mixed income neighborhoods.
At the back end, they help challenged borrowers to deal with “underwater” situations that mitigate the “moral hazard” and promise investor returns.
The major challenge in getting shared equity solutions to scale is developing standard and uniform practices, procedures and documents so the shared equity mortgages can be securitized.
Conrad Egan is Senior Advisor for the Affordable Housing Institute.
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