Category Archives: Equity Sharing

0522 2013 FARJHO is the answer to Rep Loretta Sanchez’s question to Fed Chairman Bernanke today.

In Bernanke’s testimony today, Representative Loretta Sanchez asked about how middle class families who had lost their homes in the downturn have been unable to regain home ownership in the current housing price run-up made happen by the new hedge fund land lords.

Immediately following that, Senator Mike Lee asked Bernanke about the potential danger in repeating the previous credit bubble by the current loose monetary policy and easy credit again pop up the housing sector.

I am glad to see that the politicians will finally start realizing the problems with the Fed’s monetary policy and the Administration’s housing policies. I think they both may want to read my recent previous blog posts below to find the answers to their questions and assume a leader role to take the necessary actions with FARJHO to correct these serious middle class home ownership problems in a timely manner. It would be nice if only they could start watching the short introductory video about FARJHO to begin with. http://www.youtube.com/watch?v=UV0hUjAGUZg

Anybody who knows them, please feel free to forward this post to them. Thanks.

How can FARJHO help you?

Introducing FARJHO services at PeoplesAlly Foundation.

0304 2013 FARJHO offers a unique ability to curb wealth distribution inequality through home co-ownership

Although FARJHO was not created specifically with the egalitarian motive for helping the poor but rather a creative win-win free market based solution for both the aspiring home owners with less financial means and the well-to-do property investors to build wealth to co-prosper together, the equity sharing nature of FARJHO does offer a timely help to prevent further inequality in the wealth distribution among our country’s citizens under our current economic situation.

I refer back to the proposal we had submitted to FHFA back in September, 2011 in response to their public RFI, https://www.box.com/s/hpfqqajd1aremco716lr . The proposal was primarily for the GSEs to consider selling the single family homes in their foreclosure portfolios to both retail aspiring home owners and the Wall Street hedge funds or DC private equity firms together as fellow FARJHO LLC members for each single family home, one home at a time, rather than selling these single family homes in bulk, at heavily discounted prices, only to those well-connected hedge funds and private equity firms as profiteering middlemen.

Rather than treating the ex-middle class American families as the new serfdom renters to those new noble PE and hedge fund landlords via selling our national assets (these foreclosed homes are owned by the government sponsored Fannie and Freddie via our tax money), the GSEs could use FARJHO directly to sell equity stake in each single family home directly to both the PE firms, hedge funds or crowdfunding investors and aspiring homeowners who could not obtain a mortgage, at the same price, on the same terms and at the same time so that no rich fund operators need to become the new landlords and no property speculators who have access to easy credit need to buy at deep discount in bulk from the GSEs in order to flip the properties before these single family homes get to be rightfully sold to the home seeking end users.

Somehow the built-in democratic wealth distribution inequality correction features of FARJHO have not been properly understood and adequately communicated to the public over the years so far since its creation in 2009. As a result, hedge funds and private equity firms continue their feasts on buying up the single family homes left and right to become the new landlords in our economic society. The ex-middle class (and now homeless or propertyless) Americans continue to be told that the Fed’s low interest rate policy and the Administration’s housing policy have worked magic in bringing about a great economic recovery in American housing sector and they actually need a pat on their backs for the good jobs they have done for our country.

Meanwhile, the fleecing of the GSE’s foreclosed single family home portfolios continues. Isn’t it the greatest heist of the American wealth by the concentrated privileged few, while aided by the government’s misguided economic policies, right in front of our eyes? I think we do urgently need some politicians who could understand what FARJHO is and what the new FARJHO related home ownership solutions could provide in order to help curb these serious problems of furthering inequality in wealth distribution among our citizens caused by the current abusive government housing and interest rate policies in a timely manner.

For more introductory information on FARJHO and how it works please click on the following link to my draft paper on FARJHO, https://www.box.com/s/n4sg1odf8su6fmfhrv21 or visit http://InvestorsAlly.com and the home equity crowdfunding portal site http://FARJHO.com .

0202 2013 Two simple FARJHO application case scenarios

Here below are two case scenarios taken from the http://FARJHO.com site. It illustrates the value propositions of FARJHO fairly well I think.

1. Example Case for Aspiring Home Owners (AHO)

Jennifer is looking to purchase a house in Houston, Texas. She has identified a property in a nice neighborhood of her choice. The listing price of the property is $360,000.

Jennifer has $72,000 in cash as the 20% down payment for a conventional home mortgage. However, for whatever reasons, no lender is interested in lending to her at the moment. She does not want to lose the opportunity to purchase the house as a dream home and she no longer wants to continue to rent an apartment or even a single family house without benefiting from the potential rise of house prices since everyone on TV news seems to be talking about a housing market recovery these days.

She understands the new business method of FARJHO using the old property equity sharing concept could be something suitable for her situation. After doing her own research she realizes that by being a partial owner to own a home through equity sharing she would no longer be able to get the entire leveraged returns as she could have by using a conventional mortgage to own a home. She would only be able to get the percentage of the potential price appreciation of the percentage of ownership that she has in the home property.

On the other hand, she would also lose only the portion of the potential property value depreciation of her percentage ownership when prices do not turn out to go up as most people would expect. She thought that these basic shared equity financial arrangements was fair and she knows she could always buy more units of investment in home equity either in her own home property or in other people’s home equity in the future when she has accumulated more savings or gets an big bonus from her job. Whether she will actually do that will become a pure investment decision at that time.

Meanwhile, as a tenant and partial owner of the home property that she will occupy, she would enjoy much more security and stability under the FARJHO LLC that she would negotiate with the potential joint property investors on a pure free market basis. She does not need any charitable preferential treatments, guarantees or any handout assistance from the government.

Jennifer signs up at FARJHO.com and launches a FARJHO funding campaign project for one month. Since she already has the $72,000, She would only need to raise $288,000. She decides to raise the fund through a handful of crowd investors. Upon securing the investment commitments from the potential investors, she gets assistance from the company to form a FARJHO LLC to acquire the property that she had identified. After the purchase is complete, she starts to move in and pays rent to the FARJHO LLC that she partially owns with the other joint property investors.

2. Example Case for Existing Home Owners (EHO)

Robert, Amy and their children have lived in a beautiful house in a nice neighborhood in Souther California for the last 20 years. Their house is currently worth about $500,000 as determined in a BPO analysis conducted by a real estate agent’s office that they know well.

Robert and Amy have a mortgage on the house with an outstanding balance of $300,000. That means they have about $200,000 in home equity in their house which equates to 40% of the house value.

Robert and Amy’s oldest son David was going to attend college after the summer. They would need to prepare about $100,000 for him to attend college for the next four years. They decided to tap into the home equity of their house.

They looked into the possibility of obtaining a home equity line of credit. However, they do not have sufficient income to support a credit line of $100,000. Even if they do, Robert and Amy do not feel comfortable to add another monthly debt service commitment to their current monthly expense budget and bear the risk of a potential foreclosure in case Robert loses his job.

They do not want to sell the house in order to tap into the home equity that they have in the home property and they definitely would not want to move away from the family house which has a lot of sentimental value to them.

Robert and Amy went on-line and discovered the homeowners social networking portal WeHomeowners.com and its sister crowdfunding portal FARJHO.com which became operational in 2013. They opened a free member account and uploaded some nice photos of their home property to initiate a crowdfunding project to raise $400,000.

Of the total amount raised, $300,000 was meant to pay off the outstanding balance of their existing home mortgage. They did it through forming a FARJHO LLC structure where they would keep $100,000 as the 20% home equity in the house together with other joint property investors which contributed the remaining 80% of $400,000.

After the FARJHO LLC has acquired the title of the home property from Robert and Amy, they started to pay a pre-agreed market rent to the FARJHO LLC of which they are a 20% co-owner with the other investors who had contributed the $400,000.

After all the dust had settled, Robert and Amy were left with the cash of $100,000 that they needed to put aside for their son to start his comfortable and secure four-year college life.

Robert and Amy know that if they end up with more cash in their hands in the future from either daily savings, Robert’s year end bonus from his job or even Amy’s diligent weekly lottery tickets buying activities, they could always become investors themselves any time to flexibly and reversibly buy some more home equity units either in their own house again and in other people’s homes through FARJHO.com but that would really become purely another investment decision at that time.

After a few years, Robert and Amy indeed have accumulated more cash. However, they did not feel a need to buy into more home equity of their own house any more since they have already had the full 100% use of the home property. Why bother?

Nobody could kick them out as long as they continue to pay the monthly rent to the FARJHO LLC that they themselves partially own. They are not obligated to have this new cash get stuck back in the house again, although that could always remain an option to them.

Furthermore in the eyes of their family and friends, they still enjoy the prestige of being a homeowner. They can’t think of a reason why to put this new money back into their own house again. In fact, there could be many other alternatives for them to consider to put these money into a much better use.

They have finally started to understand what it really means that FARJHO could separate the shelter value away from the management of the investment value of owning a home.

After their son David graduated from college, Robert and Amy decided to use that cash to help David purchase a condo in New York City where David had obtained a job.

0126 2013 Differences between FARJHO, Shared Equity Mortgage and the LLC syndication for commercial properties

This is a very commonly asked question and has been addressed many times before in the blog. Here is a short recap. In short, the main difference is in the way to use leverage under the different structures.

Although both FARJHO as a new home ownership structure and the pooling of capital to make a commercial property investment both could employ the use of a simple LLC legal entity to accomplish their respective objectives, the outcomes could not be made more different due to their respective very different objectives!

In the conventional commercial real estate investment, the use of an LLC entity is to pool enough money so that the group of investors could borrow as much as possible in order to potentially achieve higher leveraged returns (or leveraged losses, it works both ways!). The objective of the use of an LLC is to shield the individual member investors in the LLC from the potential liability to the lender in the event of a default which may be caused by insufficient income cash flows from the property in the future. This conventional way to use borrowing to make real estate investments is described by a new term that I had created a while back called Pool-Borrow-Buy (PBB).

FARJHO, on the other hand, is employing a newly created alternative method under a new thinking called Borrow-Pool-Buy (BPB) to make investments in single family homes.

The advantage is that for investors who love to use leveraging for investments could still use borrowing, but only at an individual LLC member level under a FARJHO transaction, not at the group LLC or property level as how it was always done in a conventional mortgaged home ownership. As a result, FARJHO introduces a newly created social value by increasing the home occupancy stability for the renter/co-owner in a FARJHO LLC structure. This is simply because there is no mortgage, i.e. using the property as a collateral to borrow money, under a FARJHO structure and hence the home will never face the risk of a foreclosure by any lender.

Such a simple innovation in concept and practice could help us universally eliminate the foreclosure possibility in home ownership in our modern economic society, no matter where the home owners lives in the world.

As for the conventional shared equity mortgage, shared appreciation mortgage, and shared ownership mortgage, … etc. as most popularly practiced in the UK and to a small extent in Australia, although they do not use an LLC legal entity, the objective of the share equity component is still to pool enough money so that the shared owners could use that pooled money as a down payment to borrow a mortgage using the property as a collateral again to buy the home, i.e. another Pool-Borrow-Buy (PBB) method that will be subject to property repossession risks. This PBB practice in these old style shared equity mortgages is nothing different from how commercial property investors use an LLC structure to pool money, borrow and buy properties. The evil of the potential risk of foreclosure still exists. These old shared equity mortgages only introduce more lending and ownership disposal complexity without contributing much to housing affordability due to its limited acceptance by the lenders.

In FARJHO’s case, this lender’s dictatorship and the ownership complexity do not exist. Flexible and reversible shared home ownership under FARJHO could eventually be done as easily as buying and selling of a stock in a private or a publicly listed company on an exchange.

Lenders pretty soon would discover that they could easily develop a new profitable business by embracing this new “security-lending” business opportunity using LLC member interests as collateral at the member level instead to FARJHO LLC members.

For those old school mortgage lenders who would like to hang on to the old way of doing home mortgage business would also soon find out, to their pleasant surprise, the credit quality of their mortgage borrowers would be much better than before since the lesser credit borrowers may have all gone through the new equity sharing route and absorbed by using the new FARJHO structure. There seems to be no need for the lending banks to make more ill-conceived inventions such as a teaser rate or an Option-ARM to subprime borrowers any more.

It would indeed be a win-win situation for everybody.

1202 2012 Conference speech – FARJHO as a solution to the scaling problem for property investors

I spoke last week as a panel speaker on the scaling issues for investors at a conference for institutional investors to treat single family residences as a new asset class for institutional investment. The conference is dubbed “Single Family Aggregation : REO to Rental Forum – A Forum for Private Equity, REITs, Institutional Investors and Bank Rent-to-Own Programs” organized by IMN on November 29 to 30 at Scottsdale, AZ, http://www.imn.org/Conference/Single-Family-Aggregation-Strategies/Short_Agenda.html. The following link is a copy of my presentation slides “Introduction to FARJHO and SwapRent”,
https://www.box.com/s/wmyjnwhzm8yagrf9gjkx.

Until today, institutional investors such as corporate pension funds, insurance companies, university endowments and non-profit foundations have not been able to treat the single family homes as a separate investment asset class. What is the main reason?

Single family homes, unlike a multi-family residence apartment building, are usually spread out in many different sub division development projects in the suburbs. The management of the entire operations that include the maintaining each individual property with its own landscaping and the dealing with the tenants are usually much more demanding and difficult to handle. As a result, the annual yield derived from the rental income for institutional investors would be reduced for the increased cost to manage these diverse groups of properties spread out in a larger number of geographical locations.

In addition, the turn-over of the renters for single family homes would be much higher since over the past decades, with the easier credit and low interest rates, eager mortgage brokers have found tenants of single family homes as easy preys to sell a mortgage to. “Why rent when you could own at a cheaper cost?” Owners of single family homes hoping to rent would have suffered from much lower annual rental income yield due to the high renter turn-over and higher operational cost for the property maintenance. That by the way also seems to be one of the major reasons why our country has had the sub-prime mortgage induced economic problems at the moment.

The new FARJHO invention which basically turns renters to become co-owners with the property investors at the same time, seems to have solved these problems by killing the two birds in one single stone for property investors. Since the renter would have a vested interest as a co-owner with the other joint property investors in the FARJHO LLC that owns and holds the title of the home property – vacancy will most likely be near zero and the cost to hire a third party property manager is totally eliminated. The renter who is also a co-owner of the property could become the best property manger, care taker, house sitter, business partner for the rest of the joint property investors than a pure renter without an equity interest in the property would ever be. To understand this better, simply ask yourself when was the last time you ever washed a rental car? This seems simply to be another way that the invisible hand of Capitalism is at work again.

As result, both retail investors and institutional investment funds would no longer have to worry much about either potential vacancy or incurring the expense of hiring a third party property manager any more since renters would have a skin in the game with the other investors, and hence, much secured higher yields derived from rental income for all the property investors.

What we plan to do is to use our technology platform at http://FARJHO.com to act as a service provider to institutional funds, accredited investors and/or retail investors from the crowd, i.e. crowdfunding, to find like-minded aspiring and existing homeowners who are interested in the all cash based FARJHO transactions to co-own homes across the country without involving anything related to the conventional home loans or mortgages. The timing will be subject to the successful publication by SEC of the Crowdfunding Rules under the JOBS Act which has been scheduled at the beginning of January of 2013.

In parallel, a currently work-in-progress project of a homeowner’s social networking portal http://WeHomeowners.com or http://WeHomeowners.org will also be set up under our 501(c)(3) non-profit PeoplesAlly Foundation (http://PeoplesAlly.org) for existing homeowners who may consider switching to FARJHO home ownership structure some time in the future. This may even allow the Section-8 tenants to own a small piece of the home equity of a single family home anywhere of their own choice via a Section 8’ed FARJHO that I had blogged about before, instead of having to rent only in a multi-family apartment located at a run-down neighborhood.

1001 2012 Obama’s HARP, Romney’s housing plan, Bernanke’s QEs or the new equity sharing FARJHO under JOBS Act? – with lyrics from Loca People

It is presidential election season again, so we have started to hear more about the candidates’ economic plans. Nothing attracts more attention from the public than the housing issues. Within the past weeks, we have Romney having revealed his housing plans, Obama having pushed again for his HARP, but  none of them has anything economically new to offer other than using it as another chance to repeat the partisan ideological preaching and the fight over whether government led programs vs. the presumed free market ways to let our country’s housing finance problem heal itself may work better than their political rival’s plan. It seems that they only care more about a simple old fashion plan that appears to work better than the other’s plan rather than supporting an innovative plan that will indeed work but that may incur political risks to introduce.

Disappointed, without getting a satisfactory answer in both of their plans, so I went to the Federal Reserve again. There I found out that Chairman Bernanke and his cohorts were still pumping out nothing but even more and more QEs. All day, all night … All day, all night … All day, all night … Nothing but more QEs to push for more loans, more leveraging and more easier credit, hoping not only to bring us back but to further turbo-charge us to where we had started this whole financial mess from to begin with over a decade ago … I can almost hear Bernanke dancing and chanting at the Fed, Viva la Hipoteca! Viva le Prestamo, Viva los QEs! What the Beep!

So I called up my friend Johnny. I said to him, “Johnny, La gente esta muy loca!”

Well, jokes aside, what we really like to do is to ask those politicians with a real workable housing plan please stand up. For the right, it is easy to just say let the free market heal itself. Free market solutions without the government leadership or competition without rules would indeed simply lead to either a crony capitalism or a ruthless predatory free-for-all anarchy. For the left, once they have replaced the crony capitalism and they’ll easily end up with even worse power hungry crony socialists.

What we need is perhaps not yet another round of old ideological political debate now, but rather some educated rational thinking and technically competent debates of what the new and economically innovative ways may be to own homes without piling up more debts as well as what the new technologically efficient and productivity enhancing ways are to deliver these new economic benefits to the consumers without being misguided and fleeced by unscrupulous financial middlemen yet again. These real stuffs to fix our faulty housing finance system may seem to be what the politicians need to focus on in order to bring the real tangible benefits to our country.

This is the 6th year since I have been researching, publishing and blogging on the various economic benefits of using property equity sharing or cash flow sharing concepts and methods to offer many new alternatives to our current faulty exclusively mortgaged home ownership centric housing finance system. Many of these new findings and creations are available to my personal academic research web site, http://swaprent.com.

More detailed info on the SwapRent original creation process in 2006 is available at https://www.box.com/s/437c60e4d8931365b9e4 and on SwapRent application in the 2009 JHFI (Journal of Housing Finance International) by IUHF (International Union of Housing Finance) paper at https://www.box.com/s/feae725ede7042c53412. For the much simpler FARJHO solution, here again is the link to the FARJHO white paper, https://www.box.com/s/cc0de069ab5c3fd3007e.

Thanks to the democratic power of the Internet, SwapRent and FARJHO have conceptually and academically been gaining momentum and endorsement day by day with a world-wide audience. We are currently preparing to solidify these new innovative ideas and beta launch these new consumer services at the transaction oriented http://farjho.com and a broader social networking portal for home owners, http://wehomeowners.com as our free market based solutions to our country’s housing finance problems. The purpose is perhaps much more mission driven than financial. Since these new services could also be offered on a not-for-profit basis, i.e. through PeoplesAlly Foundation (http://peoplesally.org), we do need many supporters from the crowd to come on board to help us make these new consumer services a reality.

As explained in earlier blog posts, due to the recent breakthrough by a few visionary law makers with their innovative regulatory provisions of crowdfunding and the relaxed marketing rules of private placement funds contained in the JOBS Act, we may finally see the light at the end of the tunnel in bringing these new inventions to life as new free market based consumer services soon.

Viva la Innovation, Viva la JOBS Act, Viva la FARJHO!

(Quoted lyric above from “Loca People” by Sak Noel)

Crowdfunding of Home Equity at FARJHO.com – How crowdfunding could help solve our country’s housing finance problems

This blog post first appeared in Huffington Post on 8/7/2012. http://www.huffingtonpost.com/ralph-liu/how-crowdfunding-could-he_b_1752633.html

Ever since the JOBS Act was signed into laws by President Obama on April 5th this year, the enthusiasm on crowdfunding has mushroomed in just about every corner of America. Many people with some technical Internet knowledge would rush in to start a crowdfunding portal to help American create more jobs through helping entrepreneurs raise equity financing. Many more are anxiously waiting to utilize the new found channel to raise money for their own business start-ups from regular investors over the Internet.

At InvestorsAlly’s FARJHO.com, we have coincidentally also been trying to provide the matching services between aspiring home owners and prospective joint property investors to co-own homes through a new innovation home ownership structure called FARJHO (Flexible And Reversible Joint Home Ownership) over the Internet within the past few years.

The concept of connecting consumers directly via Internet used be to called a Peer-to-Peer (P2P) method of matching individual consumers with similar desire to consummate a transaction of a common interest, be it a dating service or a financial transaction. Going back a little bit further to the 90’s, this matching of retail consumers directly through the power of the Internet used be more popularly categorized simply as the Consumer-to-Consumer (C2C) e-commerce. So crowdfunding appears to be nothing more than another jargon as the latest variation in the evolution spectrum of the Consumer Internet service, although technically speaking it is more a Business-to-Consumer (B2C) e-commerce since the relationship seems to migrate from a one-to-one to a one-to-many relationship. The new break-through to suddenly let out the pent-up interests in crowdfunding is really on the regulatory side. Kudos to those visionary law-makers!

As for the coincidental parallel innovation on the housing finance side, FARJHO is a new way to implement the old property equity sharing concept that has been around for more than 30 years, although primarily more popular in the UK. Those older equity sharing methods did have many growing pains and never made it to the mass consumer market. Inventions in social sciences would provide new economic values just as technology inventions do. The distinguishing features of FARJHO as a new business method to implement the equity sharing concept are three-fold:

First, FARJHO allows renter/home occupier and joint property investors to own only one home at a time in order to maintain the sanctity and the freedom of the single family residence ownership. This is in sharp contrast to many community oriented equity sharing methods of Co-ops, Land Trusts, Kibbutz or hippy-ish Commune types of older equity sharing methods.

Second, as a brand new concept, FARJHO introduces and allows only member level debt financing to eliminate the foreclosure possibility which exists with the conventional property level debt financing that are commonly used by a Shared Equity Mortgage (SEM), a Shared Appreciation Mortgage (SAM), a Shared Ownership Mortgage (SOM) or any other existing equity sharing schemes to date. In all those older business methods, the home occupiers could still get foreclosed whenever they lose their monthly income capability. The concept of FARJHO is to move people from a Pool-Borrow-Buy (PBB) method to a Borrow-Pool-Buy (BPB) method in joint home ownership.

Third, FARJHO provides a natural built-in buffer to conventional renting to avoid potential eviction when the tenants temporarily lose their monthly income capability. The equity stake of the renter/co-owner of the FARJHO structure could act as an optional voluntary collateral against missed monthly rent payments and therefore provides property investors with enhanced investment security through less credit risks and at the same time provides the tenants/co-owners with more home occupying stability during the rainy days in their working lives.

Although we at InvestorsAlly have received overwhelming positive response and a very strong market demand from home owners under our various educational test marketing programs conducted in Southern California within the past two years, due to the prior securities laws related regulatory concerns, we have not been able to officially market the FARJHO service freely in a massive scale. Now with the new crowdfunding provisions of the recently passed and signed JOBS Act to be enacted by the SEC by the end of the year, we have accordingly been preparing to position and may finally be able to launch our FARJHO.com as a dedicated crowdfunding portal site as the authoritative marketplace for crowdfunding of home equity, one home at a time, through the new home ownership structure of FARJHO. This will be a giant step towards realizing a stock market for home equities.

The reason why this new regulatory crowdfunding business opportunity development could be made possible to be applied to housing finance is that the proprietary new home ownership structure of FARJHO that we have coincidentally been working on for the past few years basically corporatizes each home in America one home at a time. Since each home will be treated as a business venture via a simple LLC legal structure under FARJHO, the new crowdfunding regulatory provisions could therefore be conveniently applied to housing finance for the first time. The reason why we have adopted the LLC legal structure is that using LLC to hold real estate properties is a tried and true method in commercial properties for many decades already, even though they have been used with an opposite purpose to FARJHO as far as leveraging is concerned.

The portal site will provide free membership to homeowners around the world similar to how Facebook does for individuals with all the social networking capabilities but our homeowner members will have a specific hope of selling their homes, buying another new home in whole or in part, investing a small part of a few other member’s home equities as an investment portfolio or simply obtaining occasional short term financing through selling fractional shared equity of their own homes through the new FARJHO home ownership structure.

There could be many more other free market based new consumer choices made available to solve our country’s current housing finance problems by this new FARJHO service to free people up from the current dominant mortgaged home ownership that often results in foreclosures and hence has created many financial problems and social instability to our economic societies. Furthermore, it may lay the proper free market foundation for further future benefits to grow upon with even more innovations that we could not even foresee at this moment.

For example, the use of property equity sharing as a temporary non-debt based financing alternative for small businesses to obtain funding to created jobs, the use of property equity sharing or cash flow sharing concepts and methods for the governments as a new third alternative economic policy management tool (vs the existing fiscal and monetary policies) to provide stimulus or to slow down an overheated economy, … etc. (more detailed policy tool examples are available in Chapter 6 of the SwapRent application paper at https://www.box.com/s/feae725ede7042c53412 )

FARJHO.com aspires to become the first entrepreneurial venture to bring new housing related economic benefits via crowdfunding to the American consumers under strictly free market principles by harnessing the power of social innovations, Internet technology advancements and the timely regulatory foresights.

A copy of the original FARJHO creation white paper could be downloaded through this following link. https://www.box.com/s/cc0de069ab5c3fd3007e

0701 2012 Shared appreciation methods could be used as a macro economic stimulus tool, not just narrowly be used to let distressed home owners hang on their homes only

While this very same topic has been repeated many times before, I still feel this is where the economic policy makers of our country need to understand most but have failed to do so thus far. Housing, housing finance professionals and mortgage experts may need to work together with the macro-economic policy makers for these new economic concepts’ potential implementation. Shared appreciation or equity sharing techniques and methods, when implemented in an isolated way to distressed home owners only, would not achieve the desired results because they may lack the normal free market incentives and motivations for free market investors’ participations.

This relevant past blog post https://peoplesally.wordpress.com/2011/11/26/1126-2011-we-need-to-blow-up-a-home-equity-bubble-using-equity-sharing-methods-not-debt-like-how-silicon-valley-blew-up-tech-company-stock-market-bubbles/ may illustrate these big picture economic concepts well. For more detailed execution methodology by the policy makers and central banks, please refer to Chapter 6 of the my earlier SwapRent paper (http://www.box.net/shared/v24qtqip4hlgff5l1646 ) published in the December 2009 issue of the Journal of Housing Finance International (HFI) by the Brussels-based International Union of Housing Finance (IUHF).

I would like to emphasize again that equity sharing or shared appreciation methods could not only be used to assist home owners to hang on to their homes in a narrow way, they should better be utilized to facilitate economic stimulus to the masses at the grassroots level to create jobs and revitalize our country’s economy.

The key concept is that only when these new equity sharing and cash flow sharing services such as FARJHO and SwapRent or any other methods and concepts provided by other economists are made available and offered to the public in general, not restricted simply to distressed home owners only, so that the market will indeed have a chance to recover due to these new methods that could foster positive market investment sentiments and expectations.

Free market investors would then more likely participate voluntarily to provide capital in a stampede. If executed correctly, no arms twisting of these free market investors would be necessary for them to throw money voluntarily into the housing market, as long as they themselves see the profit making potential. The way for our country’s economic policy makers could get involved in these new equity sharing based economic policy management tools, would not be that much different in the Fed’s current role of jawboning to create investors’ expectation in the interest rate markets.

Let’s hope the economic team hired by the next Presidential Administration would get to see the light soon.

%d bloggers like this: