Tag Archives: shared appreciation mortgage

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.

0503 2012 Application Example of An Arbitrage Investment Opportunity Using the New FARJHO Home Ownership Structure

This example appears in the 2nd page of InvestorsAlly’s FARJHO marketing flyer. https://www.box.com/s/1f2e57e6f0ac5b6738f0

Application Example of An Arbitrage Investment Opportunity Using the New FARJHO Home Ownership Structure

Do you want to put your idle home equity to work so that you could earn more appreciation potential? Would you be interested in helping other less affluent residents to partially co-own homes in California?

You could use your excess home equity to co-own homes with a tenant/partial home co-owner in a new home ownership structure called FARJHO – Flexible And Reversible Joint Home Ownership. Here is a short analysis for a home of an appraised value of $2,000,000. The amount of cash out re-finance is assumed to be $1,000,000 for illustration simplicity purpose as an example.

Before                                After

Current Home Fair Market Value

$ 2,000,000               $ 2,000,000

Re-Investments in Other FARJHO Transactions

__________              $ 1,000,000

Equivalent Home Equity for Potential Appreciation

$ 2,000,000              $ 3,000,000

What about the carry, i.e. netted monthly cash flows between expense and income under the FARJHO transaction?

*         A financial arbitrage currently exists as the mortgage rates are still being artificially kept very low.

*         Between the current long term fixed rate borrowing cost (e.g. 3% – 4% for a 15-year or 30-year fixed rate mortgage) and the current market rental yield (e.g. 7% – 12%) there exists a net positive carry of 1% – 5% annually after deducting all taxes, fees and insurance cost in favor of the arbitrageurs under a typical FARJHO transaction.

*         The cost of the monthly mortgage payments will remain the same for the next 15 or 30 years but the income from monthly rental receipts will adjust every two or three years and would most likely to go even higher in the current trend.

*         The arbitrageurs who take out the cash-out re-finance now could enjoy not only the potential long-term price appreciation from much expanded home equity, they will also receive a check as additional current income every month.

*         The current low fixed mortgage rates may not last forever. A change will be coming and it would be wise to lock it in now.

The free enterprise capitalism based new home ownership structure FARJHOSM could let pure profit-driven real estate investors help other aspiring home owners partially co-own homes through the equity sharing concept without the imprudent use of any debt. FARJHOSM was created back in 2009 as a fair and equitable business method to address the free market needs of both joint property investors and aspiring home owners. Through FARJHOSM, foreclosure will no longer be a possibility going forward. It will help restore our national economic prosperity, foster the steady growth of our country’s housing industry as well as promote the on-going neighborhood stability and social harmony in local communities throughout our country!

0402 2012 The distinguishing features of FARJHO as a new business method to implement the equity sharing concept are three-fold

The following text appears on the 1st page of InvestorsAlly’s FARJHO marketing flyer. https://www.box.com/s/1f2e57e6f0ac5b6738f0

Do you have trouble in obtaining a conventional mortgage to buy a home or any trouble in selling your existing home when potential buyers could not qualify for a mortgage to buy your home?

InvestorsAlly could help you buy a home using the new equity sharing method and/or help you sell your house much quicker because InvestorsAlly could help other potential buyers obtain both conventional mortgages at low mortgage rates when they have good credit, and if not, help them try the new alternative equity sharing method of FARJHO.

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 Commune types of older equity sharing methods.

Second, as a brand new concept, FARJHO only allows member level debt financing, to eliminate the foreclosure possibility which exists with conventional property level debt financing as 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 under those old property level financing arrangements.

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.

0303 2012 What is the difference between the cash flow sharing SwapRent solution and a Shared Appreciation Mortgage? – SwapRent is similar to a separate flexible employment contract substitute to hold on to the house

When I said before SwapRent was a bit ahead of its time since its birth in 2006, I meant that most people were unfamiliar with what economic value it could bring. After the financial crisis, most economic policy makers were still learning what property equity sharing concept is and what methods are out there that could be used to solve our current housing led economic crisis. Sadly after more than 5 years, it still appears that the law makers, financial regulators, economic policy makers of the federal governments are only starting to realize the value of the concept and making recommendations for the private sector banks as well as the GSEs, housing agencies to learn how to apply these concepts through the only term in this equity sharing field that they know of, i.e. shared appreciation mortgage.

As one of the most superior and advanced methods to deliver the economic benefits of property equity sharing, ownership sharing or appreciation sharing, the SwapRent related methodologies have been made available to private sector banks, housing finance agencies of the federal, state and local governments through various direct communications and educational campaigns since 2007. It seems that all those efforts were in vain. Now that these supposedly wise men at the government are being called upon by the politicians to study the application of shared appreciation mortgage again to solve the housing finance led economic problems of our country. So let’s take another try to see whether they could comprehend it now or are willing to think outside the box to learn something new.

The new creation of a SwapRent transaction is to allow a free market exchange, between an arms length investor and a property owner, a series of cash flow payment responsibility for a period of time vs. a portion of the upside appreciation right and the downside depreciation risk obligation of the property in question at the maturity date of that cash flow paying commitment time period.

This new SwapRent contract could be flexibly offered separately, super-imposed on and be artificially attached to a conventional mortgage, be combined as a package and/or be detached at any time so that the SwapRent contract could be traded by itself independently, like a free market based derivative financial contract, in an open exchange to allow price discovery and capital regeneration. It is therefore much more flexible, effective, efficient and useful than the old, obsolete, flaw-ridden and rigid shared appreciation mortgage, the shared equity mortgage that have been around for more than 30 years as well as their most recent reincarnation of shared ownership mortgage.

The unfortunate thing is that these academics and economic policy makers whose task is to study, research and come up with a better mouse trap than the old shared appreciation mortgage simply went straight back into those old, obsolete, flaw-ridden and rigid shared appreciation mortgage concepts and methods again. They do not seem to be able to jump out of that old mortgage box to start thinking outside the box. The longer these incompetent policy makers continue to squat on their jobs the more our country’s economy will continue to hemorrhage. It appears a competency issue that only history will prove on hindsight.

Anyway, since the information of the SwapRent based solutions have been made widely available in many written articles at this blog, at SwapRent home page, in many published newspapers and academic journals already, there may not be a need to repeat all those info here again. Let’s take a quick look at what SwapRent concept can do on more than helping cure distressed non-performing mortgages and assisting home owners to hang on to their homes instead.

The way to think of this swap between receiving a series of monthly cash flows vs. giving up a part of the future upside potential could be interpreted and applied to many other events in our daily economic lives.

For example, use you yourself, the body and mind owner, as a case in point. You, like all of us, have a need to receive a series of monthly cash flows to buy groceries to feed your family and pay rent or mortgage payments for your home as a shelter. After you have applied for a job and been hired by your employer, you have effectively entered into a SwapRent transaction. Your boss has simply agreed to provide you with a series of monthly cash flows (your salary) for a period of time (your employment contract period) in exchange for your upside productive potential. Whatever you could produce for the company during the contract period will simply become the company’s material or intellectual properties and become exclusively the company’s financial rewards. Even if you have a great money making idea and developed a patent on it, that would become the company’s property and the company will make all the upside financial rewards out of that patent and all your other future economic productivity to make the patent financially valuable.

On the other hand, if you are an entrepreneur or a small business owner, you receive no fixed monthly cash flows from anybody else since you have no boss but you get to control your own destiny and get to enjoy the entire upside potential rewards of your own talents.

Similarly, what the SwapRent related concepts and methods were originally designed to do for you, the real estate property owner, as a comparison case in point, is quite similar. You may have a need to receive a series of monthly cash flows to pay for a part, or in whole, your monthly mortgage payments which may become delinquent when you have lost your job, either completely or got a lesser paying job instead. So you could, out of free will, decide to give up a part, or in whole, the future financial price appreciation potential of your home property in exchange for receiving the series of monthly cash flows that you need now to continue to keep the legal ownership of your house. If you do not receive any cash flows from any body else, you would of course get to enjoy the entire potential upside appreciation, i.e. assuming you have some other non-free market based magical way that you would not get foreclosed.

In this example above, the new concept and method of the cash flow sharing SwapRent contract simply provides another way for you to obtain a series of monthly cash flows to meet your daily responsibilities in your economic life. Taking a job was the only choice in our capitalism society before. Now with the invention of SwapRent, you the consumer, have been given another free market based choice, if you happen to own a real estate property already.

From an employer’s or an investor’s perspective, the way for them to derive more upside financial returns and grow economic potential for their capital and resources, they could either hire a person by giving him/her a series of monthly cash flows to enjoy the whole upside of his/her talents through a job or an employment contract, or they could simply provide a series of cash flows to a property owner in exchange of either a part, or in whole, of the upside financial appreciation potential of his/her property for a period of time.

I hope the analogy provides a better way to understand what the new SwapRent transaction is about and what kind of power it could provide as an additional consumer choice alternative to our daily economic lives on a pure free market basis.

0806 2011 From the old Pool-Borrow-Buy (PBB) equity sharing concept as in a SEM or SAM to the new Borrow-Pool-Buy (BPB) concept as in a FARJHO – A simple innovation in housing finance that could eliminate home foreclosures all together

This is one of my most popular blog topics being repeated many times but with a different way to explain this new concept each time. Many new way of explanations were in fact inspired by many questions raised by my blog viewers.

In the current practices of our Western banking industry and our real estate investment industry until today, people always use the property directly as a collateral to borrow money to purchase and own a real estate property. Tax codes were also often designed by the lawmakers to give preferential treatments to investors who have borrowed using the property as a collateral to invest.

As far as the equity sharing or shared equity concept goes, it is usually a common practice in commercial property investments rather than residential real estate investments such as home purchases. This is due to the fact that commercial investment projects are either of a larger investment amount or they are usually made for investment purposes only. Unlike commercial properties, many purchase decisions of homes are made more for sheltering reasons. Home owners could also afford to own the home directly without other investors’ help since the investment amounts are usually smaller when compared with commercial property investments. In addition, home owners usually have a natural desire to have a full control of the property.

The problem with using the property as the collateral to borrow in the old shared equity property financing method of Pool-Borrow-Buy (PBB) is that if the property value declines, it may automatically trigger a massive selling either voluntarily or involuntarily, which will feed on itself and create a market collapse. It makes no difference whether there are any equity sharing in the down payments or not. Foreclosures will happen either way and hell will break loose either way. The equity sharing concept as practiced in those old methods were therefore naturally deemed useless.

For commercial real estate market, foreclosures usually immediately create a economic problem. For home ownership or residential real estate market, it will present not only an economic problem, but also a severe social problem as well. These problems have been clearly illustrated in many of the financial crisis events within the past few years.

Therefore, sharing equity to qualify for borrowing or to borrow even more will not help much economically and contribute almost nothing socially to home ownership for our economic society. Unfortunately these SEM (Shared Equity Mortgage or Modification), SAM (Shared Appreciation Mortgage or Modification) or factional interest home equity investment schemes are exactly what have been touted by many other practitioners, governments and academics alike until today. Those structures will not solve our country’s home financing and home ownership problems socially or economically.

Governments who set up policies using those ill-advised methods (e.g. the original HAMP proposal in 2008) have only destroyed people’s confidence in the equity sharing concept to solve the problems and let the mortgage foreclosure problems deteriorate further day by day.

Why is FARJHO different? The differentiating concepts created by the new FARJHO (Flexible And Reversible Joint Home Ownership) structure are explained here below again.

First, it corporatizes home ownership one home at a time so that it will create a familiar and convenient legal vehicle for other investors to share the equity of the home property with the home occupier who is also a co-owner of the property.

Second, it offers the real estate investors a chance to use leveraging to enhance investment returns through a new Borrow-Pool-Buy (BPB) concept over the conventional Pool-Borrow-Buy (PBP) concept used in equity sharing methods which has been practiced until today for both commercial property investments and most of the other equity sharing schemes or some other proposed factional interest home equity investment and financing schemes.

By using this new BPB method, it means that the factional or partial owners in a home, either the Joint Property Investors (JPIs) or the Aspiring Home Owners (AHOs) could all have a choice to borrow against their individual member interests in the FARJHO LLC structure so that they could pool the money to purchase and own the home property in cash together. The AHO who will be the sole home occupier will simply pay the legal entity property owner FARJHO LLC a market based monthly rent as a usual tenant of the property.

When home ownership and housing finance practice have been transformed to this FARJHO way, pretty soon there would not be home foreclosures any more. It is really as simple as that! For more details on how this new BPB home financing method under FARJHO could be done, please see some of the earlier blog posts on this issue below. Thanks.

https://peoplesally.wordpress.com/2011/07/04/0704-2011-confusion-on-various-equity-sharing-schemes-why-farjho-and-swaprent-are-more-social-innovations-than-simply-financial-innovations/

https://peoplesally.wordpress.com/2011/02/28/0228-2011-farjho-opportunity-for-gaining-political-credit-for-politicians-and-the-innovation-role-for-banks-credit-unions-or-other-mortgage-lenders/

https://peoplesally.wordpress.com/2011/02/27/02272011-farjho-and-the-corporatization-of-american-homes-yes-but-only-one-home-at-a-time-and-no-corporate-financing-necessary/

0704 2011 Confusion on Various Equity Sharing Schemes – Why FARJHO and SwapRent are more social innovations than simply financial innovations.

As I once commented before, if a person is new to the French language or the Greek language, he/she probably would not be able to tell the difference between a baby gibberish vs. a poetic recital as both are “new and foreign” to him/her. It is all Greek to him/her so to speak. That seems to be the current situation with many people when they started to learn about the property equity sharing concepts and methods for the first time. Since both the concepts and the methods are all new to them, many people find it hard to tell a good method from the not-so-good or not-so-smart methods.

Shared equity “concepts” as applied to real estate property is not new. As mentioned before, the Brits have been applying them for over three decades but since the “methods” such as “shared equity mortgage” or SEM and “shared appreciation mortgage” or SAM had not been developed so well, they remain a government led socialism oriented facility so far to assist the poor in their country. Few, if any, free market based investors or participants have been interested in participating. Some British banks got black and blue bruises all over their face when they tried those primitive methods in the 80’s. There have also been some copycats of those exactly the same ideas and methods but re-bottled and promoted in the US and Australia with little success within the past few years.

What makes FARJHO stand out? Well, here is a short recap as a patriotic 4th of July message.

Three unique features make FARJHO different from all the other “equity-sharing methods” or various other “shared equity schemes” ever proposed or practiced so far.

First, the FARJHO/LLC owns one home at a time as “a single family solution”. So the goal of FARJHO is to ensure the sanctity of individual home ownership for individual citizens one home at a time under pure capitalism principles, not a defunct or hippy-ish multi-family commune, land trust, kibbutz or socialist compound concept. We do not have to turn our country into a socialism or communism society to help the poor!

Second, unlike SEM, SAM or all other shared equity schemes proposed by other academics or practiced by other private companies so far, FARJHO does not allow, or does not encourage at least (remember it is a free market democracy and no dictator allowed), any borrowing at the property level to use the entire home property as collateral. All other equity sharing methods are schemes developed to make Wall Street loan sharks even happier so that home owners and investors who gang up together can go crazy leveraging and punt again. Do some simple research through Google searches and you will quickly know what I meant. Those shared equity properties that borrow again at property level may still get foreclosed. They may make the elite minorities on Wall Street happy again but there are few, if any, social benefits in those schemes to mom and pop families on Main Street.

With FARJHO, going forward in the future, borrowing will no longer be the only way for people to own homes. There is no reason why the home property purchase could not be done using all pooled-together cash. The term “foreclosure” may even become obsolete when people started to apply borrowing only under the FARJHO proposed concepts, i.e. borrowing at the member level instead of at the property level. AHO (Aspiring Home Owners) and JPIs (Joint Property Investors) could decide to use prudent leveraging individually before they come to the table to form a FARJHO LLC to own the home. Once the FARJHO LLC is formed there is no more borrowing allowed at the property level so that banks or anybody else in the world would never be able to seize the property from the tenant/partial home owner in a FARJHO structure.

Therefore if and when any of the leverage-loving FARJHO/LLC members ever loses his or her own debt servicing capability in the future, he/she could drop off quietly individually without jeopardizing the stability and occupancy rights of the home property for AHO or the investment security any other JPI investment members who own the rest of the interests in the property. This defaulting member could simply sell the percentage member interests in the property that he/she owns to any other people in a free market or turn them over to the lenders if he/she had financed the purchase of these member interests in the beginning.

Thirdly, it provides an enhanced stability for the home occupier through a voluntary feature offered by the Aspiring Home Owners (AHOs) to the other Joint Property Investors (JPIs) to use the AHO’s equity stake in the FARJHO LLC as a buffer for JPIs to deduct the missed monthly rental payments by the AHO so that the AHO would not be evicted so easily until the buffer runs out. It therefore offers much more home occupier stability than any other rental arrangements.

In a bigger picture for the society, when lesser credit-worthy aspiring home owners have resorted to these new socially beneficial equity financing methods, what is left for the banks to lend to, using conventional mortgages, will be much better credit quality home buyers/borrowers. More free market based consumer choices will always be a win-win situation for everyone under the uninhibited capitalism. So there is no reason for those good banks or good capitalists on Wall Street to fear or feel threatened by these socially oriented new inventions.

More summaries on the social benefits of SwapRent will be described again later. Many of them could of course already be found at the SwapRent.com web site.

So today’s message on the 4th of July, 2011 is really – you can still be a capitalist to provide social benefits to the working class people in America. For doing that we may need the American people to acknowledge and accept these new social innovations under capitalism operating principles rather than keeping asking for bail-outs or hand-outs. In addition, we will need the ultimate transparency in their implementations so that the new innovations would not be stolen, hj-jacked and abused to benefit the privileged few when landed in the wrong hands by the dark forces of the elite minorities in our society again.

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