Saturday, July 21, 2018

All in Unison

"These startups want to buy a share of your house. Is that a good idea?" by Andy Rosen Globe Staff  July 19, 2018

What if, instead of taking out a home equity loan from a bank, you could ask Wall Street to invest in your house?

You’d get cash upfront, and if the value of your home went up, the investors would get their money back, plus a profit. If the value of your home fell, the investors would earn less or maybe even absorb a loss.

Sounds great!

That’s the idea behind a new crop of venture-backed startups hoping to make money by betting real estate values will continue to climb in selected markets around the country. It’s called “equity sharing,” and the entrepreneurs behind these companies say it serves an unmet need for homeowners who want to capitalize on their biggest asset — without selling or taking on monthly loan payments, but consumer protection advocates say selling a piece of your home to investors raises complex questions, for both homeowners and financial regulators.

The investments must be paid back when the home is sold or within a set time period — often 10 years. Homeowners who don’t have enough cash to repay the money could wind up taking out loans or being forced to sell their houses.

The deals could be complicated for consumers to understand and vary widely in their structure, with some companies taking a percentage of any gain — or loss — in value after they made their investment, and others entitled to a share of the overall home value at the end of the term, but what they have in common is that, unlike with loans, their total cost is determined by unpredictable housing market forces. Homeowners who see big gains after taking an equity investment could wind up paying more than twice what they received.

Some industry observers worry that equity sharing could provide an end-run around the tight lending standards put in place after the 2008 subprime mortgage collapse, which help determine whether borrowers can meet the obligations they are taking on.

Yeah, let's bundle them up and sell them to investors, pension funds, etc.

Because shared equity products are described as investments, rather than loans, purveyors argue that they are not subject to the huge array of licensing and reporting requirements that apply to home equity loans, home equity lines of credit, and reverse mortgages.

“When you’re dealing with primary residences, that’s a situation that could have potential lifetime repercussions,” said Scott B. Astrada, director of federal advocacy for the Center for Responsible Lending. “Some of the models I’ve seen raise a lot of questions and concerns that we don’t have answers to yet — and I don’t think anyone does.”

He also questioned what would prevent the companies from ignoring low-income, minority, and rural communities that have seen slow growth in real estate values following the Great Recession.

The state Division of Banks said it is reviewing the new products. The state Securities Division, which regulates investments, said shared-ownership arrangements may also fall under its purview, but it declined to comment on whether it had taken any action.

That will get around to collecting the kickbacks, 'er, fining them later.

There is little data on how common equity sharing has become, but it is drawing considerable interest from financial backers. Hometap, which recently raised $12 million in venture capital, was launched last month. Point, based in Silicon Valley, said it has taken in $15.4 million, plus $150 million for investments. And Unison Home Ownership Investors in San Francisco has raised $40 million and plans to invest more than $300 million.

Eoin Matthews, cofounder of Point, said he believes the industry is carrying out thousands of transactions per year. And he expects that to accelerate quickly.

“I would say by this time next year there will probably be thousands of transactions a month, still not huge in the mortgage space, but it starts to feel like a real product at that point,” he said.

Investment firms say they can cut a check within weeks, with payments ranging into the hundreds of thousands of dollars. The size of the deals generally cannot exceed the amount of equity clients have in their homes — that is, the current market value minus the balance of their mortgages.

John Moses, 39, of Chelmsford, found Unison last year while he was looking for a way to free up about $50,000 to invest in a health care startup without going into debt. After a series of discussions with his wife, the two decided to sell a piece of their home to Unison. Moses realizes that the cost of the investment could potentially outpace any gains from the startup, but he said he’s confident he’ll come out on the winning end.

“It was a really big deal to own a house. And those are big things you think about when you’re making a financial decision and you’re leveraging capital in something you own and you have an emotional attachment to,” Moses said. “But at the end of the day, a home is still an asset.”

For Tyler Newcomb of Centerville, the calculation was simpler. The cash is more valuable to him now than it would be later. He used a Unison payment to pay off an unexpected tax bill and to have more cash on hand.

“I feel much more comfortable with extra money in the bank,” sad Newcomb, 69. “I should be retired, but I still work, and it’s nice to have that cushion.”

Hometap, a Cambridge startup that recently began offering equity sharing in Massachusetts, provided the Globe with the following example of how an investment might work:

The company invests $100,000 in a home valued at $1 million. If the home value rises to $1.3 million after 10 years, Hometap would get 15 percent of the sale price, or $195,000, nearly doubling its money. If the value declines to $900,000, Hometap would get 12.5 percent of the sale price, or $112,500.

Hometap said it arrives at the percentage rates when it makes the investment, and they are based on a variety of factors, including how much cash a client accepts, the type of property, and economic trends in an area. Like most of its peers, Hometap also charges closing fees when the investments are issued.

Holden Lewis, mortgage analyst at the financial site NerdWallet, said people who try equity sharing are taking on a big financial risk because they cannot know the cost of the deal until repayment is due.

By contrast, the cost of a standard home equity loan is transparent: The interest on a 10-year, $100,000 loan at current rates would be about $36,000, Lewis said, but home equity loans normally require monthly payments — shared equity does not.

Rick Sharga, a real estate industry veteran and the vice president of Carrington Mortgage Holdings in California, said regulators will soon begin to take a greater interest in the products, especially as they begin to grow more common.

“This could be the best deal ever,” he said. But Sharga said the uncertainty of a new industry could also lead to problems. “You don’t know what you don’t know.”

That's a fine time to quote Don Rumsfeld.


Wait until you see how much it costs to park there:

"Still paying full retail for downtown parking? The car next to you might be getting a better deal" by Beth Teitell Globe Staff  July 19, 2018

In a sane world, paying $22 to park for an afternoon shouldn’t be considered a steal. Then again, this is Boston, where a State Street garage charges $28 for an hour — itself an insult — and hikes the rate to $42 if you stay for an hour and one minute.

That first four word phrase was the first thing I read in that edition of the Globe, and my instantaneous reaction was now for a descent into the insane.

Btw, State Street just raised their rates.

Enjoy your time in Boston!

So when Carol Brooks Ball, a digital media consultant from Topsfield, scored a $22 spot for five hours by using a parking app — a price $17 cheaper than the garage’s drive-in rate — she started to worry.

“I thought the parking attendant was going to say, ‘Lady, you’ve been scammed,’ ” she said.

Parking in Boston has long favored garage and lot owners. But now online parking apps are giving a bit more power to the little guy.

Yeah, an app is the solution to any problem!

While the parking spots may look the same, the parking business is undergoing seismic changes as app companies battle behind the scenes to lock up spaces in garages and strike marketing deals with professional sports teams or event venues.

Once the most mundane of things, parking is now attracting big venture capital money and data scientists. There may come a day when driving into town and looking for a spot — as in physically, with your eyes — will seem as old-fashioned as searching for a plumber in the Yellow Pages.

SpotHero, ParkWhiz, and other apps empower consumers by allowing them to comparison shop garages on their phones or computers. That’s right, no more desperately circling the block, hoping to find a metered spot on the street, but of course ending up in a garage, the stress building as the clock ticks toward the start of the job interview or the Big Apple Circus, the kids whining in the back.

At least that’s the promise.

The apps let people reserve and pay for off-street parking in advance, and they regularly offer deals, too, sometimes significant. App companies have a bargaining advantage with some garages right now, as Uber and Lyft have given consumers an alternative to driving into town and parking.

Aren't they making traffic worse

I know they are doing their part, but.....?

Most apps work with commercial garages and lots. But at least one app, Spot, operates in part like an Airbnb for cars, making it easy for individuals to rent out an unused space.

I'm told it is a mixed blessing that explains “frenemies.”

Until fairly recently, parking was the industry that technology forgot. It remained a largely cash business with no big data analytics applied to squeeze every dollar out of every space, but over the past five years, venture capital firms have invested about $261 million in parking app companies, according to Pitchbook, a financial data and software company.

Along the way, parking has turned into a “consumer-facing industry when historically it wasn’t,” said West. In the past, he said, “you drove to a destination and looked for a parking sign. Now parking is the destination. You’ve decided in advance where you’re going to park.”

How trendy is parking? In the industry, it’s no longer even called “parking,” according to Bob Youakim CEO of Passport, a mobile-pay parking technology firm. As it becomes part of the friction-free Uber-style world, it’s going with a more aspirational name: “mobility.”

Transforming “parking” into “mobility” sounds like a marketing gimmick — like KFC dropping the “fried,” but when you talk to enough industry players, you understand that letting people reserve spots ahead of time, or pointing them to areas where on-street parking is likely available, will drive mobility by reducing the number of cars circling in search of parking.

Oh, btw, the name change was a stunt to promote its burgers. 

The fake news and ma$$ media lying is ubiquitous! All perception management and public relations!

Meanwhile, even as millions of dollars in venture capital money flow to the app companies, the little guy can make a buck, too, or do his part to reduce congestion.

In the Back Bay, Cornelius Hurley, a professor at Boston University School of Law, uses the SPOT app to rent a space he owns behind his condo. Charging $3.50 per hour, he and his wife have earned a couple of thousand dollars over the past two years. He’s also become friendly with two renters, and, as an environmentally conscious person, he’s had the satisfaction of knowing he’s taking at least one circling car off the street — all with very little risk and effort, he noted. 

Just don't tell that to the housekeeper.

“No one is going to trash the spot, and you don’t have to leave a bottle of wine to curry favor.”



“She was strangled and raped on July 29, 2006. The survivor is married now and has a daughter. However, she said she still has flashbacks when she’s driving to work or getting ready in the morning. She has trouble controlling her anger and is worried about alienating her husband and scaring her daughter, she said. After the attack, the victim took a break from school, quit both of her jobs, and left Boston. She said she is still afraid of walking alone, walking near strangers, and of the night. For 10 years, she’d lay awake at night, scared of seeing an outline of a man in her window. “He took away confidence, my trust in people, my sense of security, my freedom, my self-worth, and my dignity, all in one night,” she said. Alejandro Done, 49, was already serving a 10- to 12-year prison sentence after pleading guilty in Middlesex Superior Court in 2015 to raping a woman in Cambridge who had mistaken him for her Uber driver. DNA evidence from that case led to his arrest for the Boston case, authorities said.....”

He's ALL DONE, and we should all embrace the total surveillance state to the point of surrendering your DNA.