As a lender, you underwrite a loan reviewing many things to arrive at both an approval as well as the loan’s ultimate salability. Two of the most important factors (and the major risks) are the percentage of loan to the property value (LTV) and the ability of the home buyer to service the payments based on existing income (debt-toincome ratio). With a higher LTV, the bank may be exposed to some level of loss if the property declines in value through a forced sale. Similarly, if the borrower/home buyer has too much of his monthly income dedicated to mortgage payments, and his income gets interrupted, the loan can fall into delinquency and potentially foreclosure.
Equity sharing addresses both of these major risks. With a home buyer providing a larger down payment on his purchase (i.e., his funds supplemented with additional investor funds), the amount of his purchase mortgage loan will be lower as a percentage of the value of the home, i.e., a lower LTV. In conjunction with a lower loan, the monthly payments are also at a lower level, creating a better affordability profile for your borrower.
The use of equity sharing can improve the number of conforming loans that are made. More equity may reduce the number of jumbo loans and low-down payment loans granted, as there is more equity to reduce absolute loan amounts, as well as reducing or eliminating the need for private mortgage insurance by reducing LTVs below 80%.
And lastly, by including additional equity into the mix, federal guarantees and salability of the loans allows the lenders to manage their own balance sheets better.
- Are both the buyer and the investor signing the promissory note?
No. The buyer will be the sole signer and obligor on the note. The investor is passive and therefore not a co-signer on the note. Still, the mortgage does maintain a priority secured position ahead of all down payment funds, including that of the investor. - Does the investor have a say in the loan terms?
Yes. Since the investor is concerned with the financial structure of the purchase and solvency of the buyer, the investor will evaluate the loan terms. It is always possible that the investor may see the financial structure you present as onerous or imprudent and may choose to not invest. - Who pays my fees on a new loan - the buyer or investor?
Your fees will be paid for by the buyer since they are the recipient of the funds and the signatory on the note. - Do I need to present the loan terms to both the investor and the buyer, or
simply the buyer?
Since both the owner and investor must agree to the loan terms (even though only the buyer will sign the agreement), it is in your best interest to discuss the terms with all parties. While you present the terms to the buyer, recognize that the investor still can decide whether to consummate their investment based on such terms.
- Are home buyers or investors able to search for me, or contact me, through
the PRIMARQ site?
Yes. If you are registered as a PRIMARQ-certified lender, then members and even visitors to the PRIMARQ site can find you. - May I seek business leads on PRIMARQ?
If you want to cultivate leads on the PRIMARQ website then we suggest you:- Become a valued contributor on the various discussion boards and forums
- Become a PRIMARQ-certified lender so that your credentials and capabilities are visible to our members
- Do I need to register with PRIMARQ?
Yes, you will need to register with PRIMARQ. More than that, you will need to be educated about how PRIMARQ works by participating in a PRIMARQ webinar specifically created to train you in how to benefit yourself and your clients through PRIMARQ’s products and services. Time will be allotted for questions and answers so that you will have confidence in how to use PRIMARQ’s services for your given situation. As a PRIMARQ-certified lender, you will be given access to dedicated email, live chat, and customer phone services so that you will have answers whenever you need them. - Will PRIMARQ provide me with literature regarding co-ownership to share
with my clients?
Yes, when the PRIMARQ Exchange opens, we will provide collateral material that can be sent to your office or accessed online. Complementary samples can be shipped on request. Online PDF files can be downloaded and forwarded or printed at no charge. Also, we will have customer service representatives available for discussion.