Balance Homes is offering to co-invest in homes for homeowners who are struggling to qualify for a traditional low credit refinance. Through the program, Balance will pay off the consumer’s mortgage in full, in exchange for a portion of their home equity.
The investor, which operates remotely, has launched the program in five states.
“Today all available options for struggling homeowners increase long-term debt and don’t provide any flexibility or help the immediate effects of financial instability or other adverse life events,” said Daniel Osman, Balance’s head of sales. “We wanted to provide another option that could help homeowners get on stable ground without incurring additional debt and provide flexibility in keeping their equity and staying in their home.”
The company says the program is a new and unique way for homeowners to own their homes without conventional mortgage debt, available to homeowners in underserved communities who might not otherwise be able to remain in their homes.
Borrowers still make monthly payments on their homes that the company says are “similar or lower than a traditional mortgage, with the flexibility to skip a cash payment and pay with a home equity withdrawal instead.”
The program allows homeowners to purchase back shares of equity from Balance at any time, the company said, which lowers their monthly payment amount. The company says it allows homeowners to live in and improve their homes as they please, like a traditional mortgage, and can repay Balance’s investment through refinancing or selling the home at any time.
The company also says its program is designed to provide forbearance relief to people who wouldn’t qualify otherwise. It’s not clear yet whether the CFPB will view this as relief or an unregulated banking enterprise that will ultimately end up owning the homes of borrowers who get into trouble.