2011-08-15T12:19:00.003-04:00

"EQUITY SHARING" EQUALS STABILIZATION OF HOME VALUES AND LENDER SAVINGS!

Realtytrac™ ...Foreclosure Sales Report First Quarter 2011... Average sale price of a foreclosure was $168.321 (26.66% below the average sales price of properties not in foreclosure of $229,508).

Pre-foreclosure sales, which are often short sales, sold for an average discount of 9.49 percent ($207,728) and were in foreclosure an average of 228 days (7.5 MONTHS) before selling. The Average loss is over $40,000 including Real Estate Commissions and Closing Costs.

REOs sold for an average discount of 35.08 percent ($148,997). The Average loss is over $90,000 including Real Estate Commissions and Closing Costs. Bank-owned properties that sold in the first quarter had been repossessed by the bank an average of 176 days prior to the sale (5.8 months). Nationwide, foreclosures completed (REOs) in the first quarter of 2011 took an average of 400 days according to Real Estate Economy Watch.

AMERITRUST SOLUTIONS has developed a “Title Holding Equity Sharing Trust” (THEST) Program:

The THEST program will allow homeowners to offer Beneficial Interest (equity interests) in their homes while retaining virtually all of the benefits of home ownership. It is fully administrated by a third party independent trustee (Ameritrust Solutions). The Homeowner would have the right to redeem the Investor’s percentage at any time based on a third party appraisal and would have the right to sell the home at any time to an unaffiliated third party at or close to current market prices (as determined by third party appraisal). It could be used in several different situations.:

1. For homeowners with distressed or unaffordable mortgages, the THEST Program would be utilized to reduce the principal balance of the distressed mortgage below “Current Market Value” and convey an equity interest in the property to the Lender/Servicer who agrees to reduce the size of the distressed mortgage to make it affordable for the homeowner. Lender/Investor would save over $32,000 versus a Short Sale (Over 14.5%) and a savings of $88,000 versus a Foreclosure (Over 38%).

2. For home buyers buying REO’s, the THEST Program would facilitate down payment support by the lender/investor to reduce the home buyers overall cost. Selling price would be After Repair Value (Current Market Value). Lender/Investor would have the new home buyer’s Mortgage Loan that could be a FHA 203K rehab loan for low credit scored buyers or Fannie Mae Home Style Rehab Loan if property is in need of repairs over $5,000. REO's sold at Current Market Value (ARV). Average savings to Lender/Investor is over $74,000 (Over 32%) and Home Market Stabilization could be achieved.

Equity Sharing is the concept whereby a lender/investor shares with the homeowner the Home’s Appreciation and Mortgage Principal Reduction. It can be instrumental in putting responsible principal reduction into the process for loan modifications. Most loan modifications done to date fail to help most homeowners with their real problem, Negative Equity. If the principal is not truly reduced the homeowner ends up with a tax deductible rent payment.

For homeowners who would not qualify for loan modification after principal reduction, a short sale buyer could be offered Equity Sharing that facilitates down payment support by the lender/investor to reduce the buyers overall cost. Purchase price would be Current Market Value. Again, the Lender/Investor would maintain the new loan and Home Market Stabilization could be achieved.

The lender/investor would be paid their investment or consideration (Contribution) upon the sale of the home regardless of home’s appreciation.

Homeowner shall have the right to make capital improvements to the Property. "Capital Improvements" are those projects or set of related projects of a capital nature which are intended to increase the value of the Property and/or to extend its useful life, the costs of which exceeds $5,000.00. Homeowners shall have sole responsibility for the cost of the Capital Improvements. Homeowner(s) doing major property improvements will be credited to their Capital Account up to 70% of the resale value.

Title Holding Equity Sharing Trust (THEST) Disbursements:

a. First distribution of proceeds — all existing debt against the Property shall be paid;

b. Second distribution — all costs of sale, if any, shall be paid (i.e., escrow Real Estate and transfer costs); paid by Homeowner.

c. Third — all of lender/investor’s initial contribution (Cash or Consideration) shall be paid at termination.

d. Fourth — any contribution/s made at inception of the agreement by "Homeowner”, and/or any sum/s mutually accepted thereafter (Allowable Home Improvements) expenses. Shall be paid to "Homeowner");

e. Fifth — any remaining money ("Net Proceeds") shall be divided among the homeowner and lender/investor of the Title-Holding Equity Sharing Trust in direct proportion to their percentages of beneficiary interest held.

Title/Deed held in the name of Ameritrust Solutions (Trustee).

What happens if homeowner experiences another financial hardship or a job transfer and cannot afford to sell (Not enough appreciation)? With the approval of the lender/investor:

a. May have Trustee enter into a triple net lease not to exceed three years with a tenant.

b. May have Trustee enter into a Lease Option to Purchase Agreement with a Tenant/Buyer (Two separate agreements). Reducing homeowner’s beneficial interest (Percentage) not less than 10%.

On Friday October 15th 2010 Treasury announced changes to HAMP (See Announcement). The Treasury specifies the use of Equity Sharing Agreements by lenders participating in the Principal Reduction Alternatives for loans that are non GSE.http://www.blogger.com/img/blank.gif

Data from the Mortgage Bankers Association shows that about 3.7 million properties are more than 90 days delinquent.

Hope to hear from you soon.

Tom Coriell
Founder and CEO
Ameritrust Solutions
tcoriell@ameritrustsolutions.com
(330) 288-8006