Ernira Mehmetaj and I published The Promise and Perils of Shared Equity Financing in the ABA’s Probate and Property magazine. It opens,
It is the rare homeowner, or even lawyer, who thinks twice about why mortgages are part of so many real estate transactions. Real estate is expensive, and few have the money to pay for a home all in cash. As a result, people enter in transactions with mortgage lenders and are exposed to all of the risks that come along with that type of financing: default, late fees, foreclosure.
If you stripped away all of our history and our current practices in financing home ownership with mortgages, you might ask how could people with limited assets acquire something as expensive as a home? It turns out that there are all sorts of ways to slice and dice the rights and responsibilities of homeownership to offer households just the aspects they want and no more.
A new development, shared equity financing, will make us all think twice about mortgages. Its sharing of the risks and rewards of a home purchase will be attractive to many, but it also has its own share of perils that are unique to it.