Third-Party Equity Financing
Northern California Urban Development, a non-profit group committed to eliminating poverty in the area's urban communities, and the EARN Group, a developer of real estate financing tools that replace a portion of traditional mortgage debt with third-party equity financing, have partnered together to help many San Francisco Bay Area homeowners keep their homes.
Through the Foreclosure Prevention Program, NCUD and EARN are working with several Bay Area municipalities to help immediately reduce mortgage defaults by refinancing existing loans and replacing a portion of the current mortgage debt with an equity investment.
The program targets owner-occupied homes currently in default by more than 90 days. If the homeowner can qualify for a lower mortgage payment on approximately 70% of the current fair market value of the home, the balance of the financing will come from local government agencies that will replace the remaining debt with an “EARN Equity Certificate.” This certificate has no current payment requirement for the homeowner. Instead, the homeowner will share that portion of the home’s future appreciated value with the local government agency.
“The Foreclosure Prevention Program is a financial lifeline to an increasing number of working middle class and lower income Americans who are on the brink of losing their homes and falling off a financial precipice from which they will most likely never recover,” said John Liotti, NCUD’s co-founder and chief executive officer.
“After analyzing the merits of dozens of financial proposals, it became clear to us that only The EARN Group’s ”debt for equity” exchange approach had the potential to make a real and lasting difference in our communities.”
Based on existing mortgage interest rates, NCUD estimates that homeowners who enter its Foreclosure Prevention Program may be able to reduce their current monthly housing costs by 40-50% or more. Experienced NCUD foreclosure counselors will work with the homeowners and The EARN Group will negotiate with the current lender. NCUD and EARN are currently working a number of Bay Area cities who have expressed interest in the program, including the City of Menlo Park and the City of East Palo Alto.
“For housing prices to stabilize, a portion of debt must be taken out of the equation,” said David Shapiro, president and CEO of The EARN Group.
“The program is significant not only because it reaches out to homeowners who may not qualify for any of the current federal government programs, but, more importantly, because it is the only program that exists today that reduces housing debt by valuing both the risk and rewards of home ownership. For more information visit http://www.earngroup.com>