I don't mean Uncle Sam, I mean Shared Appreciation Mortgages.
This type of mortgage is very popular in Europe but never gained any ground in the U.S. until now. With everyone searching for solutions, including the Feds, the discussion about SAM has been reopened with the lenders. Giving a 2% reduction in interest rate the lender would receive a 50% interest in the future appreciation of the property. I personally think 50% is a hefty ownership profit interest to give the lender and believe the ratio should be determined on a case by case basis.
While some believed the larger conventional loan amounts would resolve the refinancing problems for many homeowners, it clearly didn't. The fact was the lack of equity in the property prevented them from refinancing. I am certain by now most in the mortgage industry clearly see the new conforming loan amounts mean nothing. The jumbo loan amounts are still charged a higher interest rate. Only when Fannie and Freddie figure out how to market these as securities will the rates go down.
Let's look a the real value in SAM. As housing prices continue to drop, lenders can use the shared equity program as a second freeing up equity so the current homeowner can refinance out into a lower first and avoid foreclosure. The SAM can be used by providing a reduced purchase price for the first time home buyer opening the market to those who have been previously closed out. In many ways it resembles the silent second.
It's clearly not the answer for everyone. But realistically there is no One answer fits all to this current situation. Until the lenders are willing to get creative and stem the foreclosures, we will continue to have a depressed housing market and property values will continue to decline.
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