Despite predictions that home prices are close to bottom, the leading provider of home equity protection sees its customer base exploding in 2012 because of changing consumer attitudes towards homeownership.
In an interview yesterday with Real Estate Economy Watch, EquityLock Solutions’ President Ted Rusinoff said that by year’s end he hopes to reach 10,000 customers under contract for the innovative product, which is not an insurance policy but a contract. After launching in April 2011,
Rusinoff said the greatest problem limiting demand is loss of confidence in housing, especially with first-time buyers. “We’re back to 2000 prices today. We’ve lost 12 years of equity growth.”
He said attitudes have changed greatly since 2006. “Just as the Great Depression changed the way people thought about the economy, the downturn in housing has changed the way people think about volatility in housing. Who’s to say we won’t see price declines again?” he said.
As a result, EquityLock Solutions (www.equitylocksolutions.com) has been marketing its product in non-traditional ways. It has partnered with leading brokerages and franchisers and like RE/MAX, Keller Williams, Real Living and Coldwell Banker to provider their buyers with a degree of equity protection in this market. EquityLock has also teamed up with builders like Pardee Homes and even banks, who want to protect themselves from lost value on their REO inventories.
However, sellers as well as buyers who promise take out EquityLock contracts for potential buyers are finding home price protection to be a draw. “I’ve heard stories of how homeowners who offer home price protection were able to generate traffic almost immediately and sell their home,” he said.
EquityLock’s Home Price Protection provides financial protection to homeowners in the event their local market index value as determined by a decline in the FHFA Home Price Index at the time they sell their home, regardless of the price the home is sold for. It is not insurance but a financial agreement to pay the homeowner upon resale should their House Price Index drops.
“When the stock market falls, you can redesign your 401K to reduce your risk. You can’t do that with a home. We’ve learned that real estate markets change and home values don’t always appreciate,” Rusinoff said.
“The day is coming that home price protection will be a part of every closing. Not so long ago, lenders discovered that title insurance would protect their interests and it became standard. Home price protection also protects the interests of buyers and lenders from a different risk, the risk of equity loss,” he said.
I would be interested to learn how this differs from Home Value Protection insurance. Sounds similar to me. It may be worthwhile in volatile real estate markets, but in most areas values have hit the bottom already.
Well, you never know.
Here’s how the two plans differ:
1.Home Value Protection Insurance is a real insurance product, regulated by state insurance authorities and sold through licensed insurance agents. EquityLock Solutions is a contract, similar to a warranty, and is sold through real estate agents, lenders and others.
2.Both are limited. HVPI pays up to 25 percent of your protected home value. EquityLock pays up to 20 percent.
3.HVPI has a 10 percent deductible for the first year, 5 percent for the second year. EquityLock has no deductible but its protection does not take effect until two years after you sign up.
4.HVPI is based on the actual loss you take on your home from the time you took out a policy and the decline in your market as measured by the Case-Shiller Index. The value of your claim is the lesser of the two. EquityLock is based solely on home values in your market as measured by the Federal Housing Finance Administration Home Price Index. It is possible to actually make money on the EquityLock coverage if you sell your house for a profit and the value of homes in your market as measured by the FHFA index declines between the time you sign up and when you sell.
5.HVPI costs around $50 a month depending on the value of the home you are insuring. EquityLock . EquityLock costs an average of currently 2.05% of the value of the home; financing is available.
6.Equitylock currently is available everywhere. HVPI is available only in Ohio, though it has applied for approval in a number of other states.
Thanks for your comment.
Estimates are that a major share of the 7,000,000 houses that have dennlqueit mortgages or are in some stage of foreclosure, as well as those yet to come, will be dumped on the market, adding to the already huge excessive inventory glut. Some 4,500,000 loans are now in foreclosure or at least 90 days dennlqueit. Can someone tell me when these homes will be dumped on the market? Cause I’ve been waiting and waiting and the very limited amount of bank owned, winterized crap out there seems to want more then real market value. Unless you have all cash (as I’ve noticed on any decent deals from closed MLS sales), you have no shot. When the hell are they going to start booting these people that have been living free since they have a good lawyer. I could’ve sworn in any other industry, if I didn’t pay my bills, they will come and repossess my sh*t. I guess not housing, I’ve been the sucker who’s been renting and saving, I should’ve brought that overpriced condo in Hoboken a few years ago, not paid my bill due to a hardship , then had the bank lower the principal (true story from a friend who works at a hedge fund and blows his entire check every month and runs up the credit cards).