FOR IMMEDIATE RELEASE
July 31, 2002
Contact:
Debra Daniels/Neighborhood Reinvestment: 202/220-2354
Innovative Home-Equity Protection Product Gets
Trial Run in Syracuse
Program Designed by Neighborhood Reinvestment, Yale School of
Management To Protect Syracuse Homeowners Against Equity Loss
From Declining Housing Market
WASHINGTON, DC—A unique product specifically designed
to protect homeowners against losing their equity in a declining
housing market was introduced in Syracuse, New York; Neighborhood
Reinvestment Corporation announced.The product was developed by
Neighborhood Reinvestment in cooperation with Yale University's
School of Management and Freddie Mac and will be administered
through a subsidiary of Home Headquarters, Inc., a Syracuse-based
affiliate of the national NeighborWorks® network. Neighborhood
Reinvestment, which founded and supports the NeighborWorks network,
provided financial and in-kind support for the Home Equity Protection
(HEP) product, including studies, and product development; as
well as capital and operating expenses. Additionally, the Syracuse
Neighborhood Initiative, which is leading community revitalization
efforts in the city, has received $5 million in federal funding
for the product's initial capital reserve. "The Home
Equity Protection product in Syracuse can provide an important
financial underpinning for participants," said Ellen Lazar,
executive director of Neighborhood Reinvestment Corporation. "This
pilot effort also gives Neighborhood Reinvestment and its national
partners the opportunity to monitor the product and examine the
possibility for similar products that could benefit homeowners
in other communities."
HEP provides financial protection to homeowners in the event
that home prices decline in their neighborhood between the time
they purchase the protection and the time they sell their home.
Homeowners pay a one-time fee equal to 1.5 percent of the covered
value of the home . The property's "protected value"
goes into effect after three years from when coverage is purchased.HEP
pays down the seller's mortgage if home prices have dropped
in their ZIP code Market value is determined by home prices in
the seller's ZIP code. The amount of the HEP payment is
the percentage decrease in prices in the ZIP code multiplied by
the "protected value" of the house. Example: A homeowner
buys Home Equity Protection for a $60,000 home. By the time the
owner wants to sell, home prices in that ZIP code have dropped
20 percent. HEP would pay $12,000 (20 percent of $60,000) –
regardless of the home's sale price. Neighborhood Reinvestment
Corporation is a public, nonprofit created by Congress in 1978
to revitalize urban, suburban, and rural communities throughout
America. The Corporation charters and provides technical assistance,
training, and financial support to the NeighborWorks® network
of more than 230 nonprofit affordable housing and community development
organizations serving more than 2,100 communities nationwide.
In 2001, the network generated nearly $1.4 billion in total direct
investment and helped more than 64,000 lower-income families purchase,
improve or rent their homes.
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