Risk Reduction Mortgage, a fintech start-up providing mortgage products, has launched Risk Reduction Mortgages, its signature offering that aims to allow homeowners diversify their largest asset, reduce foreclosure and other risks, and save thousands in annual fees.
According to the company, Risk Reduction Mortgages reduce risk for all stakeholders and provide much-needed stability to the housing finance system. The offering is underpinned by Home Diversification Agreements, under which the borrower sells at local home-price index and buys at national price index.
Risk Reduction Mortgage claims its offering will eliminate the need for PMI, HFA, or piggy-back second mortgages for those unable to afford the standard 20% down payment. This would provide tens of millions of homeowners with savings of thousands of dollars.
Additionally, the product’s diversification benefit enables homeowners to substantially reduce their home-equity value risk, obtain a similar reduction in foreclosure risk, and enjoy a lower interest rate due to their reduced risk profile. Meanwhile, creditors such as GSEs can see up to a 70% reduction in systemic credit losses, the company said.
"Our new mortgage product is the most important financial innovation since securitization," Risk Reduction Mortgage founder and CEO Marc Biron said. "If available at the time, there is strong evidence they would have helped avert the 2008 meltdown."
The Risk Reduction Mortgage will be offered exclusively by the company. The new product will be made available to homeowners and creditors starting in 2019.