Product has been long in the making
While the product seems to have been rolled out in response to rising rates, Doyle said it’s been in the works for a while. “We didn’t do it because interest rates rose so much,” he said. “We were planning to do it irrespective. We’ve actually created an entirely new alternative, a new option, for the market and borrowers.”
The new product emerges at a time of record levels of housing wealth – some $28 trillion in equity – tempered by higher rates. Signs have pointed to a drop in rates this year, but Doyle said he doesn’t see this as having a negative impact on his company’s newly launched product.
“We never should have had 3% mortgage rates, 2.5% mortgage rates, or 2% mortgage rates,” he said. “The suppression of interest rates led to an awful lot of inflation. This is my opinion: Mortgage rates can fall, but we shouldn’t see those loans again.”
EquityChoice benefits homeowners by allowing access to their home equity at a below-market, fixed interest rate. Yet the product was also designed to benefit investors – including what Doyle calls “joint venture partners” – in that it is REMIC-eligible. A REMIC – or a real estate mortgage investment conduit – is a special purpose vehicle used to pool mortgage loans and issue mortgage-backed securities.
The first mortgage product to emerge since 1991
In those respects, Doyle suggested, EquityChoice is something of a groundbreaking product. “It’s not an exaggeration to say it’s the first new mortgage product since 1991,” he asserted. “I’ve been challenged on that a couple of times, but the two law firms we worked with in developing the product made that statement to me. The last new mortgage product was the index ARM in 1991,” he asserted. “Now we have a product that has a shared appreciation feature.”
Source: mpamag.com