Home Diversification Calls for National Mortgage Platform Following Chrisman Commentary Feature

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Key takeaways

Home Diversified Solutions Corp. is promoting a zero-down, no-PMI mortgage tied to a diversified pool of homes.
Research indicates lower expected credit losses for a Home Diversified Mortgage compared to conventional loans.
The primary challenge remains finding a national institution to handle infrastructure, compliance, and distribution.

Home Diversified Solutions Corp. announced today that Chrisman Commentary has featured a new article by Marc Biron, MBA, CFA, and Steven L. Siegel, DBA, examining what may be the central commercialization challenge facing Home Diversification: identifying a national mortgage platform capable of bringing the concept to market at scale.

The article, “Mortgage Innovation Has a Distribution Problem,” argues that a new mortgage structure can offer compelling consumer and credit-risk economics yet still fail to reach the market without the infrastructure needed for underwriting, compliance, servicing, technology, origination, capital-markets execution and national distribution.

Home Diversification is designed to allow a homeowner to exchange the price performance of an individual property for the performance of a broadly diversified pool of homes. The homeowner retains ownership of the property, while reducing exposure to the performance of a single home and local housing market.

Research by Marc Biron and Michael J. Seiler, published in Real Estate Finance in 2022 and based on more than one million Freddie Mac loans originated between 1999 and 2020, modeled materially lower expected credit losses for a zero-down Home Diversified Mortgage than for conventional mortgage structures.

“If the economics withstand independent review, the opportunity is much larger than simply helping buyers who cannot afford a down payment,” said Biron, chief executive officer of Home Diversified Solutions Corp. “The product could potentially offer zero-down financing without traditional private mortgage insurance while also appealing to financially strong borrowers who want to preserve liquidity and reduce exposure to a single local housing market.”

The Chrisman article also highlights the potential role of residential real estate brokers and agents as a national distribution channel once an executable mortgage product is established. Real estate professionals interact with consumers at the point when they are deciding whether to purchase a home and how to finance it, potentially creating a scalable channel for introducing a differentiated mortgage product.

“The missing piece is not another theoretical model,” Biron said. “It is a national institution prepared to combine mortgage infrastructure, capital-markets capability, regulatory execution and consumer distribution.”

Home Diversified Solutions is currently exploring relationships with lenders, secondary-market participants and other institutions that could help develop and distribute the Home Diversified Mortgage nationally.

Important regulatory questions remain unresolved. The company has not yet obtained a formal legal opinion determining the classification of the Home Diversification agreement or the eligibility of mortgages paired with the agreement for purchase by Fannie Mae or Freddie Mac. Independent actuarial validation will also be required before institutional commercialization.

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