Housing

The Next Home Equity Boom

By Douglas A. McIntyre
Published May 8, 2007, 11:09am ET · 2 min read

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Just when you thought consumer home equity induced spending was dead due to a slowing market and tightened credit standards, a new product promises to put some juice into it.  REX & Co, backed by a subsidiary of AIG  has a new product that lets homeowners tap the value of their homes without taking out a loan.  The novel product gives homeowners cash for their equity in return for a portion of the proceeds from the eventual sale of the home.  For instance, a homeowner who has a $500,000 home can extract $100,000 of that by giving  REX 50% of the change in the home value.  So, if the home is sold in 5 years for $750,000, REX receives half the increase, or, $125,000.  If it sells for $600,000, they receive $50,000. 
It is a break from the traditional debt based equity extraction option homeowners currently have and is available in California, New Jersey, Virginia, Florida, Washington, Colorado, New York and North Carolina.  Founder Thomas Spoonholtz expects it to be available nationwide within a couple of years.
He aims to have it sold through mortgage brokers with up to a 2% of proceeds fee and homeowners will have to commit to hold the home for a set number of years or face "early exit" fees or 5% to 25%.  This approach will appeal to retirees looking to maximize the extraction of equity from their homes without incurring interest payments.  Younger borrowers will like the fact that their debt ratios will not increase and the effect on their credit scores will be non existent.  It will also allow for higher borrowing limits since the home will be held for a minimum time frame, increasing the equity available.
What this product essentially does is allow current homeowners to borrow "future equity" in their homes and not pay interest charges.
Todd Sullivan

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Douglas A. McIntyre

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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