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42 | Th e M Rep o RT o r i g i nat i o n s e r v i c i n g a na ly t i c s s e c o n da r y M a r k e t ORIGINATION LocaL Edition t.W. lewis Founder inducted into Housing Quality Hall of Fame Company adds honor to long list. ARIZONA // Tom Lewis, founder and CEO of Arizona- based homebuilder T.W. Lewis Company, is the first-ever inductee in Professional Builder magazine's National Housing Quality (NHQ ) Award Hall of Fame, the company announced. Modeled after the Malcolm Baldrige National Quality Award—which recognizes qual- ity achievements by firms in the business, health care, education, and nonprofit sectors—the NHQ Award represents one of the homebuilding industry's highest awards for quality management. T.W. Lewis Company received the NHQ Silver Award in 1998 and earned the Gold Award for 2009. According to a release from the company, Lewis' induction reflects his "overall contribution to the housing industry and overall impact in the field of quality homebuilding." "This is a tremendous honor," Lewis said. "I am very pleased that our commitment to quality homebuilding is being recog- nized in this way. This award was achieved over many years through a strong commitment by all of our employees that have taken great pride in every T.W. Lewis home." exploring a new Method of Financing for Homeownership CrowdsourCing CatChing on with investors. CALIFORNIA // Perhaps you've known someone who raised money for a documentary or civic project by making an appeal through crowd funding on the Internet. Now, the concept of pooled resources is being used as an investment vehicle offering equities in homeownership to investors and loan assistance to selected prospective homeowners. One of the first companies to offer such a program is PRIMARQ , a San Francisco- based capital market company that uses equity shares to enable a person to be the major equity owner in a property that other- wise would have been difficult or impossible for that person to obtain. In addition, investors are able to purchase partial equities in the property. The creative mind be- hind this movement is Steve Cinelli, founder and CEO of PRIMARQ. "I had an 'aha mo- ment' one day when thinking about the housing finance base established 90 years ago by the Federal Home Loan Bank back in the 1930s," Cinelli explained. "I realized that other asset classes have both equity capital available to the users as well as well as debt capital, and I wondered why there wasn't an equity capital market for hous- ing. I also wondered why there isn't financing tied to the asset price movement, namely equity," he explained. Subsequently, PRIMARQ was created to bring equity capital into the mortgage and housing market. Some may doubt the need for such a plan in the current market with interest rates being so low and doubt that prospective homeowners would choose to invest in equity rather than take on debt in such a low interest rate environment. Cinelli explains that lenders have become more restrictive in terms of their underwriting. Last month, in fact, ushered in increased standards that make credit availability very tight. "You've got to have exceeding- ly high FICO scores, and banks require additional liquidity over and above the down payment," he said. He also explained that during the past 18 months, nearly a trillion dollars in mortgage applications have been denied to people whose credit scores were over 700. "The rea- son for denial is that the debt to income ratio was too high and/ or there was insufficient down payment. In other words, the deficiency of equity causes the problem." Cinelli believes that through the homeownership and in- vestment plan offered by his company, many people who find it difficult to be approved for a loan will find a solution. "Although there are [Federal Housing Administration] programs that allow for lower down payments, there are other costs to consider which jeopar- dize the ability of an individual to qualify for a mortgage," he said. "If the prospective home- owner doesn't have enough capital, then let's bring in private capital to supplement that and allow those investors to benefit from the price movement of the property." The first thing PRIMARQ does when considering whether to secure financing for a prop- erty is to consult with a number of data and analytic firms that not only assess credit market values, but also identify pro- jected price movement and ap- preciation rates on the property. In addition, they consider other factors that drive price move- ment such as job creation and inventory in the area. Secondly, assuming there is a level of debt in the purchase, PRIMARQ looks at how much leverage is being applied to the property. The debt, if priced appropriately, creates a leveraged return for the equity investor. Then the third consideration is to ensure the prospective homeowner is qualified to assume the debt. To accomplish this, PRIMARQ does its own credit underwriting. "We take a proactive view of the homeowner's present employment and also assess his ability to find new employment in case his present job ends," Cinelli said. "Our assessment is not just based on this person's The concept of pooled resources is being used as an investment vehicle offering equities in homeownership to investors and loan assistance to selected prospective homeowners.