Residential Lease Buyback Pools

Nearly 25% of the occupant mortgaged residential real estate in the U.S. has pay-off principals that are in excess of expected proceeds of sale based upon current market value. In the venacular, they are 'under water.' Few of these situations will be resolved without resorting to a short sale or foreclosure. What this means is that the five million families who have owned homes and currently, due to damaged credit, cannot get financing are likely to grow over the next five years to over twenty million. This creates an opportunity for alternative financing mechanisms.

RLBF enables credit damaged families to enter into long term occupancy arrangements that offer a blend of owner and renter features. The family will be able to consider homes that are currently for sale but not available for rent. Clearly, this could begin to heal the severely bruised existing home market. Based upon the family's preferences, they may participate, to a greater or lesser degree, in potential capital appreciation of the property. Additionally, unlike traditional rental arrangements, the occupant can control and benefit from property improvement projects.

RLBF will allow real estate professionals to productively expand their property search on behalf of families who are currently restricted to the rental market. It will provide loan originators with a powerful new tool to get the credit damaged family into a home. It will provide to the bond market an investment product that is real estate backed, not mortgaged backed and that, with the generally depressed housing prices, represents a significant decrease in risk.

Because the three separate functions of home ownership, occupancy, investment and property control are severable through RLBF, housing budgets, depending upon the decisions made, may prudently be increased to as much as 4.5X annual income. Because of this, over time, this home financing option may expand to credit healthy families.