A major US brand wants to pay your mortgage. Learn how it can work.
Would you like an extra 13 grand a year? The first question would be, “what’s the catch?” Of course, there is one, and it seems too good to be true. The biggest companies in America want to make your mortgage payment and you keep living in your home. Would you trade some equity to eliminate one of your biggest monthly bills and help save the US economy? The average US mortgage payment is $1100/month, so keeping it brass tacks — would you like to hold on to that money?
If the meek shall inherit, then nerds will save the world — at least in this case, we hope they do. It seemed like there was no way the math would make sense. After solving that hurdle, how likely would it be for the largest consumer-facing brands in America to rally around a central theme and concept in housing that — pardon the expression — might just save the US if not the world? There is never total certainty, and yet we know we have the best possible chance with this plan. This agenda is where bold crosses the line into some made-up Doritos word. Dinamita Chile anyone? Anyone?
The numbers don’t lie. This time the housing crisis is too big for a government bailout so we turned to the best option — your favorite Major Life Necessity Companies. Think of the five or six companies that have become a de facto part of your habits and spending. That is a Major Life Necessity.
Full disclosure, I have received compensation at various stages of my career from firms involved in this concept. That is part of the point. They have to be known quantities. The Herculean task is going to be ensuring buy-in on a short timeline. It’s ambitious and that’s why the most innovative firms in America are leading the charge.
Let’s quickly recap the challenging problems we are solving: Affordability: ranging from dual-income households experiencing job loss, the increase in home prices where wages have not kept up, and supply and demand in urban areas leading to 12 years of nationwide home value increases in much of the US has created a wide affordability gap. Buying and owning a home has to be less expensive for the average American family without declines in real estate values.
Ultra Tough Goal: Achieve lower monthly payments and home values increase.
Credit Availability: feel posh and call it liquidity. Liquidity refers to how fast banks, lenders, and other forms of credit can be processed and cycled through the economy. When homeowners are struggling to make loan payments this creates a compound effect where other lending tightens. Buying a home cycles new loan inventory creating liquidity. Increases in property values boost the number of homeowners that can access their home’s equity or secure lower payments through a refinance. Make buying or restructuring your home’s equity easier.
Ultra Tough Goal: Access to credit is good. When loans are not repaid it prevents new loans from being made — not good! We must solve this.
Consumer Confidence: Job creation, housing stability, and increases in the wealth effect are vital to the economy’s recovery. In Part 1 we discussed how much real estate means to real GDP — 13.9%. That is $17T per year in the overall economy with over $33.6T in the total value of the asset class. Consumer spending drives 70% of economic growth. Create jobs, stabilize home values, and encourage consumer spending.
Ultra Tough Goal: Jobs and stable house prices mean homeowners spend and the economy recovers.
Unclenching the Market: with nationwide stays on evictions and longer and longer forbearance periods, we are kicking the can down the road. The musical chairs of let’s wait can’t work indefinitely when you have institutions, landlords, and large lenders with debt obligations to satisfy. Companies essential to our economy have bills, too. Ensure monthly mortgage payments are paid without further burdening already stretched homeowners.
Ultra Tough Goal: Create a privatized, and nationally supported program that achieves the relief of forbearance and is profitable and sustainable.
My Nobel prize can say: when people have money, jobs, and homes the economy does better. This isn’t groundbreaking thinking — it’s just hard because it is really big. I know it sounds like a first-year business major got a little too stoned and said, “if only there was an easier way for people to have money, man. It’s like….such a HUGE problem.” I have spent 20 years in this industry, and it’s true. The solution isn’t complex. Deployment and bringing crazy big concepts to market is what we do best. Ideas are worthless, execution is magic.
There are somewhere between 5 and 15M homes that may experience some serious level of foreclosure risk. That’s far too many to add to our ability to ingest in housing inventory. In a healthy market, we only sell 5.5 to 6M homes per year.
Meet BraveHome — the concept we know is ambitious, aggressive, listens well, never forgets your anniversary, pays your mortgage and will work to help stabilize the economy. Isn’t it dreamy…
The BraveHome Model Consumer View
- For the millions of Americans facing foreclosure risk — 9.8M to be exact as of today, major companies will make their monthly mortgage payment while they stay in their home. This isn’t a refinance or a loan.
- This payment is done in exchange for an equity share in the house. They make the payments investing in the longterm overall historical increase in home values and both you and the company win. You save money every month and make less when you sell the home.
- As a long-term program, these investments can last up to six years, more than enough time to invigorate spending and economic recovery.
- You still have to maintain your home, pay the taxes and insurance, and of course your bills.
- Most of these large innovative firms have a suite of products, gadgets, swag, systems, and daily helpers that will be provided for testing, branding, and marketing. They want to invest in your home and in you and your family as engaged consumers. You spend less and the company makes money. This is a profitable venture.
The Model Requires A Major Life Necessity Partner
- A major life necessity company: we consider a major life necessity company one in which you absolutely leverage their offerings so often that it is a fundamental part of your daily life. This is key. For me, I use Amazon, Apple, Facebook, and Google 20–50 times a day. I would miss these companies if I didn’t have access to them.
- The major life necessity company may be outside the real estate sector to a degree with strong financials. This came down to the need to have no entrenched thinking on ‘the way the industry has always worked’, and the ability to raise capital. Innovative, loved by consumers, and able to acquire billions in capital. It starts to become a shortlist fast.
- If BraveHome sounds pretty patriotic, it is meant to. This is the private equivalent of a wartime bond program. Just because our enemy is unseen doesn’t make it any less of a threat. We succeed together. That’s how an economy works.
The BraveHome Financial Model
- Each MLN will deploy a larger than normal test to gauge interest — which we already know will be massive. Then, each will raise between $15 and $50B in a debt raise via BraveHome Bonds.
- The strength of these firms and the added value of the bonds leveraged to acquire real estate will keep the rates low and the global appetite for this debt strong.
- Based on the model of making monthly payments, this prevents the bottleneck of millions of difficult refinance or sale transactions, that would be unlikely to happen while keeping the capital flowing to the largest lending engines of the real estate sector.
- With a smaller amount of capital required for each home, a $25B debt raise could feasibly support helping about 400,000 families stay in their homes. With 10 firms this means 4M homeowners have stability, equity, and possibly their futures supported if not saved.
- Once the compounding effect comes into play, this is a strong, lower risk investment for these firms pulling in, on a six-year average, $42B/yr in financial and customer value after the payments on $250B in debt.
- The numbers look great for consumers and companies alike. It’s a scaled mutually beneficial arrangement. Those are the best kind.
Who Facilitates the Program?
- My passion for the American people includes being a for-profit economist aka a capitalist. We intend to facilitate these programs along with a few other key tech giants already well-known in the real estate space.
- This can be a $500M/year side hustle for these real estate tech giants. We felt we could find a way to work this into our offerings. There are things we all must do to sacrifice for our country. Note: this is not one of them.
BraveHome makes sense for the companies that facilitate it, the firms that fund it, and the American homeowners that benefit from it. The math works and more Americans get back to work. I love spreadsheets as they always fully account for ALL human deviation from the norm. So there is that aspect still to account for — when the map turns into terrain.
We have a lot to figure out, yet not much more. In the south, they would say, winner, winner… chicken dinner. That works for me. If a little country isn’t your thing, how about an extra ten grand or more a year in your pocket?
That seems to get attention in every corner of the nation.