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MAKE HOMEOWNERSHIP MORE SUSTAINABLE, EQUITABLE, AND AFFORDABLE

MAKE HOMEOWNERSHIP MORE SUSTAINABLE, EQUITABLE, AND AFFORDABLE

PROJECT H20

Economic Architecture is designing a scalable, market-based approach to provide low- and moderate-income homeowners with liquidity during critical life events. Project H2O is a liquidity insurance product that homeowners can claim when they experience income and expense shocks to stay current on their mortgage. This will make homeownership more sustainable by reducing delinquencies, defaults and eventually foreclosures.

IMPORTANCE OF LIQUIDITY

Traditional mortgage underwriting has been based on metrics which assure the lender of a sufficient asset base to cover the loan value, and the borrower’s financial profile based on a snapshot of time. This is not always an accurate representation of the borrower and misses the inevitable changes to a homeowner’s financial profile over the course of a 30-year mortgage.

The JPMorgan Chase Institute publication “Trading for Liquidity” focuses on the important role that liquidity plays in a homeowner’s ability to stay current on their mortgage payments. When a homeowner with insufficient liquidity experiences an income or expense shock, they lack the funds to make their mortgage payment regardless of how much equity they have in the home. On the other hand, evidence shows that homeowners with sufficient liquidity tend to make their mortgage payments even when they have limited equity in the home.

IMPORTANCE OF LIQUIDITY

Traditional mortgage underwriting has been based on metrics which assure the lender of a sufficient asset base to cover the loan value, and the borrower’s financial profile based on a snapshot of time. This is not always an accurate representation of the borrower and misses the inevitable changes to a homeowner’s financial profile over the course of a 30-year mortgage.

The JPMorgan Chase Institute publication “Trading for Liquidity” focuses on the important role that liquidity plays in a homeowner’s ability to stay current on their mortgage payments. When a homeowner with insufficient liquidity experiences an income or expense shock, they lack the funds to make their mortgage payment regardless of how much equity they have in the home. On the other hand, evidence shows that homeowners with sufficient liquidity tend to make their mortgage payments even when they have limited equity in the home.

A NEW APPROACH

In 2022 the Urban Institute published “Normalizing Forbearance”, which found that approximately 70% of defaults are due to a life event such as unemployment, death/illness/injury, illness or some other unexpected expense shock. Options like forbearance or loan modification can help but come with extra expenses. A financial product that provides homeowners with liquidity could help decrease the number of delinquencies, defaults and foreclosures.

HOW IT WORKS?

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H2O will make mortgage payments on behalf of homeowners when they experience and unexpected income and/or expense shock

H2O will be available to homeowners to purchase at the point of origination or after

H2O will be compatible with most mortgages and will be complementary to existing loss mitigation programs and Mortgage Insurance

KEY PARTNERS

HOW IT WORKS?

01

H2O will make mortgage payments on behalf of homeowners when they experience and unexpected income and/or expense shock

02

H2O will be available to homeowners to purchase at the point of origination or after

03

H2O will be compatible with most mortgages and will be complementary to existing loss mitigation programs and Mortgage Insurance

KEY PARTNERS

H2O IS A PROJECT OF ECONOMIC ARCHITECTURE, A NEW CITIZEN SECTOR ORGANIZATION DEDICATED TO ADDRESS PROBLEMS OF HISTORIC PROPORTIONS BY ADVANCING STRUCTURAL INNOVATIONS WITH THE POTENTIAL TO (RE)DESIGN THE MARKET.

This work is supported by JPMorgan Chase and The Chicago Community Trust

MEET OUR TEAM

Stuart Yasgur  

Aditi Advani Ramirez  

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