Technology provider ""ISGN Corporation"":http://www.ISGN.com has partnered with ""EquityRock"":http://www.equityrock.com/index.php, a pioneer in residential real estate equity sharing, to create a unique loss mitigation solution that allows lenders who offer mortgage principal reductions to retain a stake in the property's future appreciation.[IMAGE]
According to the two companies, RESET, as the solution is called (short for Real Estate Shared Equity Transaction), is the first equity sharing loan modification service of its kind in the industry. They say this approach not only helps lenders reduce losses from properties in danger of foreclosure, but provides a viable alternative to outright principal forgiveness while offering borrowers a way to erase negative equity and remain in their homes.
The partnering firms explained that with RESET, in addition to modifying or refinancing the borrower's mortgage, the lender writes down the principal balance so that the borrower no longer owes more than the property[COLUMN_BREAK]
is worth. As part of the transaction, the lender will gain a stake in any future appreciation should the property be sold or refinanced.
As is typical in a corporate debt restructuring, the essential feature of the RESET modification is a fair, debt-for-equity exchange that benefits both the lender and the homeowner, the companies explained in a press statement.
RESET can be used by lenders and investors, as well as housing finance agencies in support of the Treasury Department's recently announced Help for the Hardest-Hit Housing Markets (4HM) program to develop localized programs for underwater borrowers. An estimated 3.7 million homeowners across the five states targeted by 4HM have negative equity with loan to value ratios that exceed 125 percent, according to ISGN and EquityRock.
RESET was created by combining Pennsylvania-based ISGN's automated NPV (net present value) technology, call center capabilities, and loan modification processing centers with San Francisco-based EquityRock's equity sharing product technologies. The companies say the result is a Ã¢â‚¬Å“turnkey, innovative set of solutions that keep homeowners with troubled loans in their homes, while maximizing value to the lender.Ã¢â‚¬Â
Niraj Patel, group president of ISGN explained that the RESET approach gives lenders an alternative to the losses associated with short sales and foreclosures. Ã¢â‚¬Å“They finally have a way to recoup at least some of the deficit that results from addressing the seriously delinquent or underwater loans in their portfolios,Ã¢â‚¬Â Patel said.