Equity Sharing: Yesterday's Solution to Today's Problem

Is equity sharing, paired with debt financing, a foregone conclusion for the future of the residential housing market?  It sure seems that way, in view of the Treasury's recent announcement advocating the use of equity sharing when paired with principal reduction activities (HAMP Update: Supplemental Directive 10-14).   But the question remains; what form and function of equity sharing will be the most suitable and amenable to implement across all applications and on a mass scale?

  click here for the full article

The Cure To The Housing Crisis: Equity Swaps

 Dr. Michael Lissack is interviewed on Switzer TV February 22 2011

“Dr Michael Lissack, one of the top 25 Wall Street bankers in the 1990s and former managing director of Smith Barney, has turned author. From floods to cyclones to people’s revolutions, he looks at how world forces shape the stock market and how equity swaps can save the U.S. housing market."

Click Here To See The Video

EquiDebt has positioned itself as a structuring and advisory agent for entities in the residential lending arena. There are three categories of entities that could utilize our services:

• Banks

• Builders/Municipalities

• Hedge Funds & Private Equity Groups

 

Our services are currently focused on four types of assets within two key areas:

1. Non-Performing Notes (NPNs)

2. Underwater but Performing Notes (UPNs)

3. Real Estate Owned (REOs)

4. Builder excess inventory (purchase money)

 

Loss Mitigation

In today’s marketplace loss mitigation rarely involves principal reduction. Two main factors affecting this are Servicing agreement limitations and moral hazard ramifications. Currently used loss mitigation strategies have met with little or no long term success.

What do we know right now? We know that fewer than 8% of seriously delinquent borrowers have received a concessionary modification of their mortgage loan (Federal Reserve Bank of Boston, Public Policy Discussion Paper, No. 09-4). Courtesy of the FDIC we learn that over 50% of borrowers who received any type of loan modification that did not include a principal reduction re-defaulted after multiple payments. What if a Note Holder could reduce the principal on a mortgage in exchange for an option to share in the potential price appreciation of the property? Exchanging that debt for equity is a classic workout solution in the commercial real estate arena but it is rarely used in the residential mortgage market. In the latter case, the issue is what to do with the resulting option on the potential price appreciation. What is its value? Can the Note Holder actually hold this option? What does the Note Holder do with the option once they get it? (more..)

 

Purchase – Down Payment Alternatives

Builders, lenders, REO holders and municipalities are all struggling to move their inventory at the price point and velocity necessary to maintain a profit. Two of the major contributing factors to this are: (i) the lack of secondary financing available and (ii) the inability of borrowers that can afford a high LTV loan with mortgage insurance or the debt load of a first and second lien. (more...)

Investors – Diversifying Real Estate Investment Risks

Investors concerned about mitigating risk and maximizing returns are struggling to revitalize their appetite to invest in the residential market. Through the use of the HEFI a residential real estate investor can invest in more real estate in a more diverse fashion and limit the risks normally attached to real estate investment  (more...)