Frequently Asked Questions(FAQs)

Before making a decision to purchase your diversification protection, is there a way to find out how my local market has performed over the last 1/5/10 years and prior versus a diversified national market index? 

Yes, you can do so utilizing our user-friendly, proprietary Home Value Comparison Tool located near the bottom of Home page of the Home Diversification Corp website. Keep in mind when doing so that local home market prices are historically more volatile (price swings up and down – can be extreme) than a national average.* That’s due to the widely-accepted financial principle of diversification, which holds that volatility is reduced by spreading risk across multiple assets or markets; often referred to as spreading your eggs among multiple baskets versus one.  

*Historic trends may not predict or be indicative of future performance.   

If I live in a local market that has traditionally outperformed the national market, why would I want or need to purchase your diversification protection? 

Our analysis indicates that local home markets that overperform the national average for periods of time eventually underperform that average in subsequent periods. Our product protects against this type of volatility over the long term, provides stability in your overall investment portfolio and delivers peace of mind not previously available. One should always keep in mind that although your local market may have outperformed the national average in the past, the past may not prove to be a good predictor of the future. 

Exactly what kind of protection am I buying for my $15 average monthly cost?  (based on a typical $300,000 home) 

Our diversification agreement provides protection in a number of key area: 

  • Equity in your home – In the event that home prices in your local area drop below a national home-price index average, we make up the difference by paying you when you sell your home.  
  • Job loss – In the event you experience loss of employment and are unable to pay your mortgage for a short period of time, our product protects you against potential default and foreclosure. If you lose your job and have registered for Unemployment Insurance in your state, for a nominal processing fee (which is paid from your account balance), HDC will make your mortgage payment from your account balance, enabling you to maintain your home and keep your credit in good standing during a period of financial distress. * 
  • Default and foreclosure – In the event you are unable to pay your mortgage for an extended period and are forced to sell your home at a time when prices in your local area drop below a national average. If you also have negative equity, our protection may provide the needed payment to enable you to sell. Without this protection, selling your home would require a payment to bring the equity in your home up to a level that pays off your mortgage – exactly at a time when you do not have cash for such a payment. The funds we provide may allow you to sell your house in a manner that keeps your credit in good standing, enabling you to move on in life. 
  • Stable and reliable investment – Our product provides protection against loss of equity in what is likely your largest asset – your home, transforming it into a more stable and reliable investment. The result is the potential for reduced-risk in your retirement, as many homeowners choose to access that equity by selling their homes late in their careers or in retirement.   
  • Peace of mind – Knowing you have protected the equity in your home, reduced the likelihood of default and foreclosure, and bolstered your retirement nest egg (more stable asset) reduces the stress often experienced by homeowners, especially during periods of volatility. Doing so provides a benefit hard to measure – peace of mind.  

*Currently in legal and regulatory review for approval. It is our intention to provide this feature.   

Do I have to purchase your diversification protection when I originally purchase the home? Or can I do so at any time thereafter? 

Currently you can only purchase our Diversification Agreement when originating a new mortgage. In the future our product will be made available outside of the mortgage origination process to any homeowner – example, a homeowner without a mortgage.  Contact us at (603) 493-3654 or to learn more. 

Please explain how I purchase your protection? 

We plan to initially offer our protection product in early 2019 to homeowners originating a new mortgage. As part of that process, your lender will collect all relevant information needed and processing will proceed in a standard manner. The underwriting and appraisal processes required to qualify for our Diversification Agreement are completed when you obtain a mortgage. We will have an additional set of documents for you to sign, including the Agreement and associated Lien documents. As is done with mortgages today, you will sign documents during the settlement process acknowledging the monthly fee, payout (or pay in) amounts at expiration and other stated provisions, as well as any penalties for failing to fulfill your payment obligations.  

Note: We are currently obtaining legal, regulatory and industry approval, which may slightly alter this process.  

Is this product considered a mortgage? If not, why do I have to take out a second mortgage to buy your diversification protection? 

Our diversification product is not a mortgage* – there is no balance to be paid down. It is considered a financial instrument that is secured by a lien, much like those issued by contractors for work performed. Technically, it’s a second lien with an initial zero-balance that will fluctuate positive or negative depending on the performance of your local market relative to a national market index. The second-lien requirement is used to secure repayment of any outstanding balance at home sale only in the event your local market outperforms the national market. 

*Currently in legal and regulatory review for final approval. 

Does the second-lien make it harder for me to refinance my first mortgage if interest rates fall? 

No it does not. Our Home Diversification Agreement states clearly upfront that we agree to subordinate our lien to make it easier for you to refinance.* 

*Currently in legal and regulatory review for approval. It is our intention to provide this feature.   

How am I able to avoid using and paying for PMI, FHA or similar using your product? 

We believe that homeowners utilizing our home diversification agreement will eventually enjoy the benefit of mortgages with lower down payments (without PMI), creating saving of hundreds of dollars in monthly PMI, FHA or second mortgage fees, and the real possibility of a reduced interest rate. This is based on preliminary discussions with banks and creditors who have indicated support for a measure of this type,* given the significant reduction in their own credit risk due to the reduction in homeowners’ foreclosure risk when a home diversification agreement is in place. 

*The feature and benefits will not be available initially. We are currently in talks with creditors and securitizers on this offering.  It is our opinion this feature will become available to homeowners in the foreseeable future.  

Given the use of local- and national-home price indices (HPI), does the price I pay for my home and what I sell it for factor into whether I benefit from buying your diversification protection? Or is the potential benefit based exclusively on the relative performance of the local-HPI versus a national-HPI? 

Your particular home price performance will likely vary from the local market depending on factors such as home maintenance and improvement levels, as well as specific home-price sale negotiations, which are unique to your particular situation. Using home price indices keeps in place appropriate homeowner incentives to maintain their properties and negotiate the best sales price. (see Scenario Descriptions table below, scenarios 1 and 2) 

Please provide numeric examples for different home price performance scenarios? 

If my local home-price index rose faster than home prices nationally when I sell, do I owe Home Diversification Corp anything? 

You may, please see the chart in question #10, scenarios #5 and #6 for relevant scenarios. It is important to note that in many cases the amount owed to HDC may be fully covered by the Sales Price. 

How can I determine what my benefit payment might be before selling my home in an underperforming local market? How do I determine my liability before selling my home in an overperforming local market? 

You will receive monthly statements indicating the positive or negative balance in your Home Diversification Corp account. You can also view your balance at any time by accessing your account through the HDC website. At closing, you will receive the payoff or payout balance amount. 

Can I cancel the diversification protection at any point if my local-HPI  index is outperforming a national-HPI? If so, how? Is there a cost or penalty to do so? 

Yes, you can cancel your diversification agreement at any time and without penalty if your local market is outperforming a national market pricing index. Cancellation will have typical processing and settlement costs. 

Note: This policy is subject to revision based upon legal review.  

What happens if I fail to maintain my monthly payments? Will my agreement be cancelled even if I have a credit balance in my account? 

Your account would be frozen in place as of the date of the payment stoppage. Upon sale of the home, you would receive a payment for the positive balance in your account at the time it was frozen, or be responsible for paying the negative balance that existed on the “frozen” date.   

Note: This policy is subject to revision based upon legal review.  

Will purchasing your protection agreement be reported to the credit reporting bureaus? What happens if I am late or miss a payment?  

We intend to report monthly payment activity, as well as the satisfaction of Agreement payout or payoff upon sale of the home, to the major credit bureaus in accordance with recognized standards and practices set forth by those agencies.  

What are the tax implications of utilizing a risk reduction agreement?  

We are not tax consultants and offer no tax advice – you should consult with a tax advisor for your specific situation.