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Home Appreciation Participation Notes: A Solution to Housing Affordability and the Current Mortgage Crisis

Author

Listed:
  • Henry J. Cassidy

    (Integrated Financial Engineering, Inc., 51 Monroe Street, Suite 801, Rockville, MD 20850, U.S.A)

  • Barry Dennis

    (Integrated Financial Engineering, Inc., 51 Monroe Street, Suite 801, Rockville, MD 20850, U.S.A)

  • Tyler T. Yang

    (Integrated Financial Engineering, Inc., 51 Monroe Street, Suite 801, Rockville, MD 20850, U.S.A)

Abstract

This paper introduces Home Appreciation Participation Notes (HAPNs), an innovative new housing finance tool. Housing is a commodity providing two distinct utilities: shelter and investment. Traditionally, buyers have had to purchase both elements in tandom. HAPNs allow buyers to purchase these elements individually. Thus, buyers can focus on purchasing housing units that best fit their shelter needs, investing in housing appreciation to whatever extent is appropriate for the needs of their investment portfolio. HAPNs are different from previous financing tools in three key ways: there is no payment burden until ownership of the home is transferred, the risk of housing price declines is shifted to investors, and the final payoff is indexed to the appreciation rates of local housing prices. With these three features, HAPNs considerably improve the affordability of homeownership while reducing the risk of default and avoiding the moral hazard associated with shared appreciation instruments.

Suggested Citation

  • Henry J. Cassidy & Barry Dennis & Tyler T. Yang, 2008. "Home Appreciation Participation Notes: A Solution to Housing Affordability and the Current Mortgage Crisis," International Real Estate Review, Global Social Science Institute, vol. 11(2), pages 126-141.
    • Handle: RePEc:ire:issued:v:11:n:02:2008:p:126-141
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    Citations

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    Cited by:

    1. David Miles, 2015. "Housing, Leverage, and Stability in the Wider Economy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 19-36, March.
    2. Chen L. Miller, 2018. "Comparison of Two Affordable Housing Finance Channels," International Real Estate Review, Global Social Science Institute, vol. 21(2), pages 227-250.
    3. David Miles, 2012. "Population Density, House Prices and Mortgage Design," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(5), pages 444-466, November.

    More about this item

    Keywords

    Affordable housing; Home ownership; Housing financing; Appreciation; Capital gain; Risk management; Loss mitigation; Home appreciation; Participation notes;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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