Commercial Mortgage Insight: Shared Equity Gains Acceptance

This article from Commercial Mortgage Insight explains how mortgage brokers and lenders can participate in the growing trend toward shared equity homeownership.

The greatest benefit of shared-equity ownership is that it presents the opportunity to both generate substantial wealth for individuals and allow communities to create a stock of permanently affordable ownership housing. Historically, the only housing options available have been renting or traditional homeownership, where the buyer reaps all the rewards of ownership, but also bears all of the burdens. More often than not, those burdens are too great for low- to moderate-income individuals.

Shared-equity ownership housing is an affordable housing solution to bridge the gap from rental housing to traditional ownership housing so that many families who cannot afford the high cost of unrestricted ownership can make a safe investment in owning homes that are likely to give them a reasonable return over time.

The current recession, having hit the housing markets particularly hard, is the perfect time to capitalize on the opportunity to create stable, mixed-income communities that will ensure generations of families the opportunity to become owners and build real wealth…

In fact, existing shared-equity models have demonstrated far better performance in mortgage repayment than other multifamily affordable products.

Interviews with lenders conducted in 2007 revealed that lenders view the mortgages they provide to shared-equity properties as profitable, generally high-quality and just supportive of good business. Almost all of the 19 lenders interviewed said that these entities enhance the mortgage and help ensure that it remains a high-quality asset for their portfolio…

Commercial mortgage finance professionals in particular are in a unique position to use their considerable influence in their communities to advocate for more sustainable models like shared-equity ownership housing that will make better use of public resources and result in safer lending products for home buyers.

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