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Advantages Abound with Equity-Sharing Arrangements

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RISMEDIA, January 7, 2011—Alex Perriello, president and CEO, Realogy Franchise Group recently wrote an article that appeared in The New York Times discussing the advantages of equity-sharing and how it can help solve the foreclosure crisis. As we continue to move farther away from the beginning of the mortgage crisis, millions of homeowners are still underwater on their mortgages, and homeowners and real estate professionals alike are constantly questioning whether there is a better way to create a solution. Perriello believes that equity-sharing programs may be the solution to the ongoing mortgage crisis that continues to sweep the nation.

Based on a simple premise, equity-sharing occurs when lenders write a new loan for the amount a property is worth today—even if the home has dropped in value from when it was purchased—retire the original loan, and take a deeded ownership interest in the property. The homeowner then agrees to split 50% of the net proceeds of any future sale of the property, and a buyout provision enables the homeowner to be able to take over the lender’s share by paying a predetermined amount of cash.

“Equity-sharing would be an easy process to put in place, assuming the lender held the loan in its own portfolio,” says Perriello. In addition to being easy to implement, equity-sharing would provide a perfect situation for everyone involved. Not only would homeowners be able to remain in their homes, but the neighborhood would avoid a foreclosure and the lender or investor would come out ahead when the home sells in the future. The best thing about equity-sharing is that it won’t cost taxpayers.

Equity-sharing would bring homeowners, lenders and investors together and help solve the foreclosure crisis.

To read Perriello’s article, click here.

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