What are the risks for the homeowner of entering into a Point financing agreement?<\/strong><\/p>\nEL: There are two important risks.<\/p>\n
First, if your home appreciates a lot, Point will be more expensive. That is a feature of the product \u2013 if your home is appreciating a lot, you can afford to give up more of its appreciation.<\/p>\n
Conversely, if your home is depreciating a lot, Point is cheaper and that\u2019s ideal because you need your capital to be cheaper when your wealth has diminished.<\/p>\n
However, we went a step further with Point and we actually cap the cost to the homeowner so that, in the event that the home experiences runaway appreciation, Point\u2019s cost is still capped at a reasonable annual interest rate. This cap clearly defines a \u201cmost-expensive\u201d threshold for the cost of Point to the homeowner.<\/p>\n
The second risk is something that Point shares in common with mortgages and HELOCs. It is a secured product meaning Point places a lien on your property. So, if 10 years pass and you won\u2019t sell the home and you won\u2019t repurchase Point\u2019s position, then we have the right to foreclose on the homeowner. That\u2019s highly unlikely, but that\u2019s a risk.<\/p>\n
BBH:<\/strong> How does Point make money?<\/strong><\/p>\nEL: There are no fees for applying for Point, but If the homeowner chooses to accept funding from us, we deduct a 3% processing fee from the funds wired to them.<\/p>\n
Additionally, homeowners cover third party costs including appraisals and escrow. When you sell your home, refinance, or when the term limit is reached \u2014 whichever is first \u2014 Point is repaid its original investment amount and its share of your home’s appreciation.<\/p>\n
BBH:<\/strong> Are there any scenarios where Point would lose money on a contract?<\/strong><\/p>\nEL: Yes. There\u2019s alignment between the investor and the homeowner. If a property depreciates then Point stands to lose money. In fact, we share in depreciation below a threshold value at the same rate at which we share in the appreciation above that threshold value.<\/p>\n
This is transformative: the investor\u2019s actual return is contingent on the property appreciating. That\u2019s different from almost every financial product out there because it creates alignment between the homeowner and the investor.\u00a0If the property does well, we do well.<\/p>\n
BBH:<\/strong> When did you begin speaking with Andreessen Horowitz about funding potential? Why do you believe it will be beneficial working with this firm on further building Point?<\/strong><\/p>\nEL: Point is creating a new asset class. This is a long-term effort that requires the best partners in the world. The company needed capital to bring this idea to market but, just as importantly, we needed visionaries backing the company.\u00a0A16z [Andreessen Horowitz] are best-in-class visionaries. They are looking to change the world for the better, and we\u2019re fortunate to join their family.<\/p>\n
BBH:<\/strong> Where would you like to see Point 5 years from now?<\/strong><\/p>\nEL: In 5 years, Point should be something that every homeowner considers as essential as diversification when investing in the stock market. Getting Point on your home should be like buying an ETF for your primary residence \u2013 a cost effective, easy way to diversify your home equity wealth that pretty much everybody does.<\/p>\n
We\u2019re not just trying to create an alternative source of funds for people who need money, but trying to create a wealth protection and wealth generation platform.<\/p>\n
BBH:<\/strong> The Homeownership rate is at its lowest level since it first began being tracked by the Census Bureau in 1965. Do you think it\u2019s bottomed out? Can we expect to see levels begin to rise again?<\/strong><\/p>\nEL: We believe that we’ll see the number of homes purchased increase over the next few years. We are finding that millennials have the appetite to own homes and it helps that many are paying down or off their student loans.\u00a0The job market has improved and more Millennials are saving for a down payment. But in coastal cities, the down payment remains high. One of our future product offerings will help with down payments.<\/p>\n
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<\/a>Photo: Doug Letterman\/Flickr<\/a><\/em><\/p>\n