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Numerous Benefits, One Major Challenge Characterize Shared Equity Mortgages

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.

Welcome to the BPC Housing Commission expert forum! This forum is intended to foster interactive and substantive discussion about pressing housing issues. Each month contributors from different parts of the housing sector will be invited to respond to a discussion topic. Guest posts will feature prominently on BPC’s website, as well as be shared regularly with Housing Commissioners to help inform their work.

Have a pressing question you’d like us to consider? Please leave it in the comments section. We encourage you and our expert bloggers to add comments, contributing to the national dialogue on solutions for the future of the housing sector.

Expert bloggers are not members of the BPC Housing Commission. Any views expressed on this forum do not necessarily represent the views of the Housing Commission, its Co-Chairs, or the Bipartisan Policy Center.

2012-08-06 00:00:00

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