Product Developed to Protect Borrowers Home Values
November 24th, 2009 | by admin Published in News, Reverse Mortgage | 10 Comments
Working Equity released an interesting solution that allows homeowners to protect 100% of the value of their home even while real estate values fluctuates said a company statement.
"We saw an immediate, pressing need for products that protect homeowners given the tremendous loss of wealth caused by the devastation in the national housing market," said Craig Schmeizer, Co-Founder of Working Equity, Inc.
Developed by a group of Fortune 100 executives, homeowners who purchase Equity Protection will receive a payment equal to their home value multiplied by the percentage decline in their local housing index.
The company offers two protection products:
- Lifetime Protection is available for existing home owners, new home buyers or home sellers as an affordable way to remove the risk of loss due to declining market conditions. With Equity Protection, 100% of a home’s market value is protected for as long as the customer owns the home. The Lifetime product can be paid for as an easy part of a home closing, or as a single payment for as little as 1% of a home’s price.
- Flexible Term Protection is perfect for existing home owners or new home buyers that are concerned about changes in the housing market and want an easy and affordable way to immediately protect against market declines, achieve stability until markets normalize, or for as long as they feel protection is needed. The product protects 100% of a home’s market value for as long as it is maintained, and can be cancelled at any time. For a typical home, flexible term protection is available for as little as $35 per month, depending on the local housing market.
As an example, if you own a home valued at $250,000 and purchase Equity Protection with a local housing market index of 100 at the time of purchase, the following scenarios could happen.
Scenario A: You sell your home for $225,000 – a $25,000 loss:
At the time of sale, the local market index is 90, a 10% decline. Since the local housing market index is down, you receive an Equity Protection Payment of $25,000.Scenario B: You sell your home for $265,00 – a $15,000 profit:
At the time of sale, the local market index is 95, a 5% decline. You still receive an Equity Protection payment of $12,500 since the local housing market index is down when you sell.Scenario C: You sell your home for $265,000 – a $15,000 profit:
At the time of sale, the local market index is 110, a 10% increase. Since the local housing market index is higher, the Equity Protection contract terminates with no payment.
You can run your own scenario at the link below.
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November 24th, 2009 at 11:06 am (#)
This is a very interesting idea as an insurance product, and timely. The big challenge is always finding a counter-party to take the opposite bet in the marketplace, although it sounds as though this is more of a pooled risk, insurance style construct than a specific zero-sum futures style instrument.
Look forward to following this product venture.
November 24th, 2009 at 12:02 pm (#)
Most likely they are hedging with short contracts on either the Case/Shiller housing index futures or via swaps – great product though, inflation virtually eliminates their long-term risk.
Even in “3-sigma events” like the current implosion, only a small percentage of properties actually change ownership, so the risk to the “insurer” is truly minimal.
November 24th, 2009 at 12:33 pm (#)
“,,,Working Equity, Inc. (“Working Equity” or the “Company”) is a corporation organized under Delaware state law and headquartered in San Francisco, California. Working Equity is not an insurance company and its Equity Protection product is not a contract of insurance or an investment contract.
Equity Protection contracts have not been reviewed, endorsed or approved by any federal, state or local government regulators or officials, including securities or insurance regulators of the federal government or any state. Working Equity is not a regulated insurance or investment company.
Working Equity's ability to offer the Equity Protection contracts is dependent upon its ability to analyze a wide range of demographic, financial and other information relating to the United States housing market. The Company does not guarantee any of the data it uses or resulting computations
When the Company sells Equity Protection contracts, it maintains a portion of the purchase price in reserve accounts established to fund the Company's contractual obligations created by declines in the local house market indices (HPI). These accounts, and the funds within these accounts, are the property of Working Equity and you do not retain any legal or beneficial interests in those accounts or the funds within those accounts. Once you pay the purchase price for an Equity Protection contract, that money becomes the property of Working Equity. We do not guarantee any particular return on any investments we make and hold. We manage and direct these investments for our own purposes……”
November 25th, 2009 at 6:27 am (#)
Who's their daddy? I sure would want to know their financial strength before taking them on as a counterparty.
November 25th, 2009 at 7:24 am (#)
Bob Cantu,
So, what exactly have you added to the discussion by copy/pasting some stuff from the company's website that I (and I assume, John as well) already read?
Did you think you were being helpful? I find that funny.
November 25th, 2009 at 10:51 am (#)
comeondude,
In these comments you declare your business acumen.
In prior comments you called counselors by the name of an animal which animal seems to have better reasoning skills than those you expressed. Then after being exposed you blatantly declared that you do not even provide reverse mortgages.
You also declared you sell things, not care for people. You expressed your disdain for those making less than $40,000 per year and those who serve you lunch. Then you railed against seniors and their children.
Mr. Cantu provided us with information. What is wrong with that?
Reading your comments in this thread produced eyesore and a yawn.
November 25th, 2009 at 11:16 am (#)
Critic
You are considered the village idiot on these forums. Your comments are meaningless.
November 25th, 2009 at 12:47 pm (#)
comeondude,
As to you, I only point out those things you write and comment on their real worth. As usual you show your genuine care and concern.
You are right. No one pays any attention to a “village idiot,” unless they are causing harm. Your insights have little to do with building our industry just tearing down others and wildly attacking seniors, their relatives, and those who provide seniors with consumer protections.
What brings comfort is knowing you are not a reverse mortgage originator.
I am just one of many trying to help you onto another website where your comments and insights will be more deeply honored, respected, and appreciated. You really do not need to take so much time with us.
November 25th, 2009 at 4:47 pm (#)
Critic, you are too kind. This person probably can't find another site suitable for his witty and insightful remarks. Since he doesn't speak to why he is here, I give him the benefit of the doubt that he has nothing better to do. So be it.
November 25th, 2009 at 4:54 pm (#)
When I read this piece, I thought maybe it was a holdover from April 1st.
How many Nobel Laureates in finance do they have (the ones not hiding under the table after the last round of financial products crashed)? Even if they do manage to get this off the ground, how long would it take to be classified as a security?