A Bay Area fintech promises to make homeownership without a mortgage possible at just $1K a month, plus other fees through a unique home equity partnership.
The plan from San Francisco-based Haus is available on select homes valued up to $2 million in four West Coast states. It’s powered by blockchain technology, in which homeowners and investors can trade a property’s equity through its HausCoin cryptocurrency. Qualified home buyers pay at least 10% on a property and Haus purchases the rest, opening the home’s equity to trading over a 10-year partnership.
“You have the ability to buy more equity at any given time at whatever the current price is, or sell equity back to us,” Haus CEO Jonathan McNulty told National Mortgage News. “When you buy and sell equity it doesn’t actually change your monthly payment.”
Home buyers are responsible for their own property tax, insurance, maintenance and HOA fees on top of the $1K per month flat fee, which creates gating factors on what property they can afford, McNulty said. The $1K monthly charge covers Haus’ automated valuation models, inspections, appraisals and other costs.
Haus homeowners have on average purchased 26% of a property’s value as part of the partnership, McNulty said. There are no servicers, as Haus runs the financing mechanism, and all payments are integrated through the Haus blockchain tech.
The structure of ownership is not similar to rent-to-own, McNulty said, because the resident, rather than Haus, is on the property title. The firm specifically designed the product to avoid the rent-to-own model because of complications in transferring ownership when homeowners were ready to sell.
“When you transfer it you have to pay the taxes, there’s a lot of fees involved,” McNulty said. “So we wanted to avoid that.”
Haus operates in California, Colorado, Oregon and Washington and plans to expand to more states. The company is treated by regulators as investors, not lenders, McNulty said, and registers assets as securities with the Securities and Exchange Commission.
The crypto aspect of the product brings a unique set of regulatory challenges. Blockchain technology is slowly making its way into the mortgage industry, although no early crypto integrations have resembled Haus’ model.
The HausCoin cryptocurrency was built on the Ethereum blockchain, created under Securities and Exchange Commission guidelines. The publicly-accessible HausCoin General Fund as of Tuesday showed 4,442,723 HausCoins in circulation with a token value of $1.4025. The ledger also reveals Haus’ equity in properties in Los Angeles, Portland, San Francisco and Seattle markets.
Because HausCoin is tied to each property’s equity, the price does rise and fall with the housing market, including within specific locations where home prices are rising faster. McNulty said. If home values were to tank, HausCoin holders lose on the equity they own but won’t be underwater, he said.
“In order to make that work, we had to create a market that allowed you to invest directly into that equity so that you can obviously know when the markets are going up,” he said. “But yes, there’s a risk involved with regards to when the market actually decreases.”
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