Frequently Asked Questions

FAQ #1: As a homeowner and a potential economic tenant how can I obtain a quote to see what amount of monthly subsidy I can get for entering into a SwapRentSM transaction?

Please simply fill out the SwapRentSM application form, send us an email request or contact one of our representatives to assist you. As there are many different parameters such as the length of economic renting period, the portion of the house value for the SwapRentSM transaction and the particular property valuation method that you may be interested in. We will try to provide you with a few different alternatives to let you consider which may best suit you needs.

Although there are many ways of implementation, in its most basic form, all the homeowners need to do is to make a decision on what percentage (e.g. 50%, 75% or 100%) of the value of their house they would like to turn into economic renting (i.e. being the renters of their own homes) and for how long (e.g. 2, 5, 10 or 15 years etc.). In a peer-to-peer implementation, the monthly subsidy will be provided to homeowners directly by the potential investors.

Alternatively homeowners' current lending banks could get involved if they have signed up our affiliate program so that the homeowners could convert their existing mortgages into HELM (Home Equity Locking Mortgage) which has SwapRentSM transactions embedded in it to accomplish the same goal.

FAQ #2: As an investor and a potential economic landlord, what returns could I expect to have? What will be my break-even point?

From the investors' perspective, they will be paying monthly subsidy to the homeowners every month for the contract duration in exchange for the upside appreciation potential if AG SwapRentSM contract is used. They will bear the downside depreciation risk at the same time if Generic SwapRentSM is used.

In the presentation slides the value used for Generic SwapRentSM rate (GSR) in a sample neighborhood is 2% with the mortgage funding cost (MFC) being 5% as a starting example. Each will be driven by supply and demand sentiments in their respective traded markets. So the subsidy is 3% every year for the homeowners to switch to economic renting. If the GSR trades up at 3% by supply and demand factors and the MFC remains unchanged then the annual subsidy will be 2% .... etc.

So the investment decision for investors is very simple. Using annual 3% subsidy as in the existing example, the cost for a 5-year SwapRentSM contract is 15% (or ~16% considering compounding), total subsidy for 5 years. If he/she thinks the potential appreciation will be higher then it is a good investment for him. For the 10 -year SwapRentSM contracts, he can compare the potential appreciation he feels and the cost of 10-year subsidy of ~30% etc. As of Friday October 12th, 2007, given the negative sentiment for the near term outlook on US residential real estate, a SwapRentSM market rate levels (mid-point between bid and offer rates) for MSA (Metropolitan Statistical Area) of Los Angeles could look like the
following as one of the arbitrarily suggested example scenarios for illustration purpose only:

1Y 2Y 3Y 4Y 5Y ..... 10Y 15Y 20Y
                 
15% 10% 5% 3% 2% ..... 1% 0% -2%

If the Mortgage Funding Cost (MFC) stays the same at 5% for all maturity, it means the annual subsidies from the synthetic "economic landlord" investors to the synthetic "economic tenant" homeowners (i.e. the MFC minus the Generic SwapRentSM) are as follows:

-10% -5% 0% 2% 3% ..... 4% 5% 7%

The break-even points for the investors of cumulative general US residential real estate market appreciation (negative sign means depreciation) represented by the MSA level property index are when these indices will have to go up by this amount (without considering compounding and the time value of money for illustration simplicity):

-10% -10% 0% 8% 15% ..... 40% 75% 140%

Since SwapRentSM rates capture more than the information of the current physical rental rates in a given neighborhood or city in the real world and it also reflects the market expectation of the expected return from the price changes during the holding period, the very high Generic SwapRentSM rates for the shorter maturity indicate the extreme bearishness in the US residential real estate market at the moment. As long as the drop in prices at the end of the contract period as represented by the local MSA index does not go below 10% for a 1-year contract the investors will come out ahead. The same is true for the cumulated returns for a 2-year contract. The flat annual subsidy and expected return for a 3-year contract simply indicates that people may think the market could recover to where we are at today in 3 years' time. Starting from a 4-year contract there will be
positive annual subsidies for the homeowners, ditto for the even longer term maturity contracts.

As could be seen by these examples, the supply and demand as well as the general market expectation will drive where the Generic SwapRentSM rates could be traded in a given local market although they will also be bound by any risk-less arbitrage opportunities that might exist.

It also illustrates that in the current environment if the homeowners want annual subsidies such as in the case of the defaulting subprime borrowers whose ARM rates had been reset higher may need to commit to longer terms contracts, say 4 or 5 years and longer in order to attract investors' interests. The homeowners could always unwind their SwapRentSM positions that were built in their SwapRentSM embedded mortgages after one or two years for the remaining maturity whereas the market levels and the general real estate market sentiments may have already changed by then.
These examples only serve as an illustration of how the trading mechanics of the Generic SwapRentSM rates could be like under the current bearish market outlook for the US residential real estate market. It could change drastically when the market sentiments change, just like how market rates behave in any other financial markets.

FAQ #3: Does the concept still work when house price decline has already eliminated any equity left in the homes?

The key difference between the SwapRentSM approach and conventional shared equity or shared appreciation finance products (like those practiced in the UK and just got started in the US and Australia recently) is that the SwapRentSM based approach does not require any existing home equity. There could be a positive amount, zero or even negative home equity amount when the homeowners decide to use SwapRentSM embedded mortgages. It does not matter because they will not be sharing any existing home ownership with anyone in a legal contract. They remain 100% home ownership throughout the SwapRentSM contract period.

The homeowners will only be giving up partially or entirely the "future potential appreciation" which may or may not even be realized in the future. That "potential" could be monetized into a present payments to be received by the people who are willing to give it up, partially or entirely. They also get partial or entire future downside depreciation protection at the same time in a Generic SwapRentSM application.

It is easier just to think that once a homeowner decides to temporarily switch to the SwapRentSM based economic renting of course he will not have any future financial appreciation or depreciation anymore, just like a conventional renter economically. It does not matter how much home equity he has left at that moment when he decides to start using SwapRentSM.

They can switch back any time they want to economically own the property again. In this way the rich or high income people would love it too since they get to be protected from the downside depreciation risk. Being a renter for a period of time will naturally avoid the depreciation risk during that time period.

The current conventional renters can also receive SwapRentSM payments and become a synthetic "economic landlord" in order to protect themselves from the future upside appreciation risk since they are currently renting only. If property prices go up it would not be good for them in the future. For example, if renters in LA or DC had used this SwapRentSM instrument 5 or 6 years ago they would not have felt being priced out of the market now when they decide to buy and own property now.

The reason why that doing this could help the current defaulting mortgage borrowers now is that renting has become less expensive than owning once again since the interest rates have risen or been reset higher. So if the borrowers agree to switch back to renting economically temporarily, the synthetic "economic landlords" will be willing to make up the cost difference (3% annually as in the example in the slides) to them in monthly payments during the contract agreement period so that they can continue to service their mortgage payments to avoid default and foreclosure. The mortgage borrowers will get to keep and stay in their homes, as though they are renting their own homes for this contract period. They can decide to switch back to economically owning again whenever they will have higher income to pay for it or when interest rates become lower again later
on to make the cost of owning less expensive.

FAQ #4: Could you run a numerical example on how a defaulting ARM borrower whose rate has been reset higher in either the subprime, Alt A or prime sectors could be rescued from being foreclosed?

Maybe the best way is to follow through the examples on the presentation slides #2, #4 and #5. So let's say a lending bank has a defaulting ARM borrower. If the bank offers him a 5-year SwapRentSM to give him $2,000 monthly subsidy for his $800,000 house so that he would not have to default and be foreclosed now. The bank gets to postpone the costly foreclosure to begin with and therefore we could avoid a whole real estate market collapse for now. However, the value the SwapRentSM contract provides is more than just postponing. Chances are the homeowners will never have to default irrespective of what happens in the future. So 5 years later, there could be three scenarios, (a) the property stays at $800,000, (b) the property values goes down, say to $600,000, and (c) the property goes up in value , say to $1,000,000.

Under scenario (a), the homeowners simply pocketed all the monthly subsidy for the 5-year period. Nothing needs to be done now and the contact expired. He can sit tight or renew another contract at his will. Under scenario (b), the investor will have to cut a check of $200,000 to pay to the homeowners through the bank. The HELM contract requires that money be used to bring down the original mortgage borrowing amount of $400,000 down to $200,000 (in reality more like $170,000 considering principal pay-down during the 5 year period). So even if the interest levels will be high at that time his mortgage payments will be low since the principal amount has dropped down to $170,000 instead of the $400,000 beginning amount. He can therefore avoid the default even if he decides to do nothing next. Under scenario (c), the property value increased to $1,000,000 as determined by the neighborhood or city property price index. That means we will have a bull real estate market. Most likely there would have been a low interest rate environment right before the SwapRentSM contract expired so that the real estate market was pushed higher by this low interest rate environment. So even with a higher principal amount now ($570,000) chances are that the homeowners will be able to lock in a long term fixed interest rate which is affordable to him now and therefore avoiding default. He does own a house that is worth $1,000,000 now so there is no real economic loss to him and his job is more secure since the economy is strong due to this bull real estate market.

Even under an extreme unlikely 4th scenario that the property prices are sky high with a sky high interest rates (a hyper inflation situation where the capitalism system basically is on the verge of failing), the homeowners can still renew another long term SwapRentSM to get enough subsidy so that he can stay in the house until he dies or he decides to sell the house in the future. If the Generic SwapRentSM rates at that time does not generate enough subsidy, there will always be FVCMs for the homeowners in which they will be able to change the upside vs downside ratio through AG and DP SwapRentSM so they he could generate enough up-front subsidy. This leveraging economic concept will be getting closer to what the current market demand for the reverse mortgage products is now, although one is interest rate based and the other is property value based. With
reverse mortgages the homeowners will definitely lose their house at the end of the contract but with leveraged SwapRentSM contract they
may still own it in whole at the end of the contract.

FAQ #5: Would the use of a property price index as recommended instead of appraisal for house valuation purpose create any basis risks for the homeowners?

The basis risk as conventionally known in the hedging using derivatives on other types of assets takes on a little bit different meaning when it comes to real estate properties. This is simply because people actually use by living in their properties but not their stocks and bonds. They can easily control the alpha of the properties they own but not that easily the alpha of the stocks and bonds that they have invested in.

First let's consider the trade-off between hedge ratio and the trading liquidity. Homeowners obviously will get a 100% hedge ratio if we use an individual property appraisal basis but there will not be much trading liquidity in order to create a market for lenders to lay off the property value risks to the investors. A market will not be able to develop on each individual property risk. Even if it is on a pooled basis in a residential trust or a fund it still lacks the efficiency of a freely tradable market.

There will also be many moral hazard and home improvement credit issues that have plagued the conventional non-derivatives based shared equity or shared appreciation mortgage markets experimented briefly in the US but have been around in the UK for decades. It never took off in a big way what it actually deserves in the UK primarily due to these issues. So an index-based derivatives approach have its obvious advantages over these conventional shared equity finance products. SwapRentSM and its embedded new mortgage products of HELM and FVCM were originally created as alternatives or replacements for these older shared equity/appreciation finance products.

So the key question is how do we create an ideal set of property price indexes that could satisfy both the hedge ratio demand for the homeowners and the trading liquidity requirements for the investors to make this new methodology commercially viable under the free market mechanism.

Although SwapRentSM and its related consumer finance products are index neutral, i.e. they could be used with any set of property price indexes or even without an index (on actual appraisal basis) we have developed a theoretically perfect set of property price indexes for this application purpose. There is a whole section (SPIM) in the business product white paper devoted to the discussion of these issues with detailed descriptions which I will not repeat here. More detailed info could be made available upon request. Although the SPIM represents an ideal way by drilling down to the neighborhood levels (the smallest definable neighborhoods of the like-kind properties) it may take a long time to create these new indices from scratch again and get the market acceptance and confidence. Due to the crisis nature at the moment of the potential subprime borrowers application
we have simply been recommending the use of the city level OFHEO MSA HPI since it is already well known to the mortgage industry professionals. It may not give the homeowners the 97% to 99% hedge ratio but a 90% to 95% or even a 85% to 90% correlation may be good enough and on the other hand, the investors will have no problems holding a city level property value risk since there will be liquidity to trade it away if the market conditions command so.

What a more fundamental new economic concept is that these basis risks derived from the use of an index actually helps the homeowners. For example, the moral hazard and the home improvement issues of the conventional renting will be alleviated through the economic renting concept of SwapRentSM. Again having the legal ownership will give you the alpha of holding an asset, switching to economically renting let you hedge away the beta of owning a property. Therefore a public housing project with economic renting will be a much better neighborhood than the one with a conventional renting only because people will invest in home improvement freely since they still legal own it no matter what happens next with the real estate markets in general. They will only give up the neighborhood appreciation/depreciation represented by a neighborhood or city property price index. Whatever home improvement investment they have already made in the properties they will be able to get to recoup those home improvement investments when they actually sell the properties later on.

In the extreme worst case that the neighborhood or city level index has appreciated more than the homeowners' own houses have they would have nobody else to blame but themselves because they have not been able to maintain their houses the way they were supposed to. This is simply universally true with whatever properties people may own. If they did not do the necessary upkeep and maintenance so that the properties deteriorated and dropped in value they would not be able to put the blame on anybody else. This will give people the incentives to fix up their houses and do good things to improve their own neighborhoods relatively to the city or the nation. This is exactly what the city urban planners need to accomplish to let citizens enjoy the community smart growth which will lead to prosperous societies. Therefore the basis risk is really a fortune in disguise when it comes to the use of property index based house valuation in SwapRentSM related transactions.

FAQ #6 (added on June 10th, 2008) Why would city and county governments be involved since this seems to be a private sector enterprise? What are the various roles could the local municipality potentially play in order to provide the economic and social benefits to its citizens?

Basically the objective of the SwapRentSM Project for the municipalities is to set up a new way to channel fresh new money from major institutional investors such as the state pension funds and insurance companies etc. in the beginning (and even both domestic and foreign individual investors could also be possible in the future) to their local city and county communities to assist their city or county homeowners, either to help prevent foreclosures, or when it is proven that the existing homeowners are not worth helping (due to fraudulent behavior or permanent loss of economic means to own), to assist other more responsible citizens to buy those already empty homes in their local neighborhoods. The bottom-line is again, there will be eventually fewer and fewer empty homes left in the local communities due to this new housing affordability offered by the SwapRentSM contracts. More new long term residents will also be attracted to relocate here due to this newly created housing affordability which will further bid up the local property value. A simple realization of free market mechanism.

In addition, the SwapRentSM Project will provide the hedging function as one of the side benefits for rich homeowners who may not even have a mortgage on their homes, as explained above. For more info on other side benefits please review the introductory text above. The net economic effect is that the property value will have more upside than downside growth trend due to the demand driven by these benefits offered to property owners.

The project is an optional participation by the city and county citizens and the city and county government will not have to rely on any tax payer's money or federal and state grants to accomplish these economic objectives.

The initiative is in fact a political opportunity for those visionary city and county officials who are willing the make the extra efforts to assist the homeowners in their cities as well as to improve their local economy and hence their own city and county finances. Due to the apparent fact that there is no concrete help on the horizon that may come from the Federal government to stem the mortgages defaults and foreclosures the local governments may need to take their own destiny in their own hands to assist the homeowners, stabilize the declining local property value and rescue their own city and county government finances.

There are many ways a city or county government could participate in the SwapRentSM Project.

1.) At the minimum, it could act as a game keeper to make sure homeowners and investors understand what they are doing, bring them together and make sure they will each deliver what they have promised in a SwapRentSM contract to make sure that the entire process will be very transparent, honest with no room for foul play.

2.) To participate more actively, the city or county could act as the middleman in an outright SwapRentSM transaction with a contingent second lien on the homeowners property to make sure they will deliver on one hand when the property value rises, and an offsetting SwapRentSM transaction with the institutional investors on the other. To hold a lien on homeowners' properties is nothing new for many of the municipalities which are already doing it. Many of them normally provide zero or low interest loans to low income families or first time home buyers and hold second lien against their properties. Sometimes they also share a small portion of the property value appreciation with these homeowners. The SwapRentSM methodology simply extends those simple concepts and act as a superior improvement by providing the ability to create a transparent secondary market, among other advantages. Since the SwapRentSM project does not use any taxpayers' money or state/federal grants, it has no restrictions on who can receive these benefits.

3.) The city or county could also engage a participating local community bank to issue the SwapRentSM embedded mortgage HELM to homeowners but the creativeness/innovation credit and publicity may go to the bank instead upon a successful launch. In addition, many banks have severe credit crunch problems on their own these days. It may be unnecessarily risky to get the banks involved as middlemen since there is no need to incur additional problems which may be created when many of the banks collapse in the near future. When the banks collapse they will simply vanish. Municipalities may not want to their local economies be dragged down further by the potential bank collapses. The mortgage mess they had created with the Wall Street firms within the last few years is hurting enough already. It is our explicit intention to keep the SwapRentSM project as a Main Street solution, rather than being viewed as another Wall Street gimmick as the financial institutions really do not have the credibility to launch anything new to solve this crisis at this stage.

4.) For more political visibility and the best overall effects, the city or county could also set up a non-profit agency (booking-wise, no need to hire additional people to run it) to issue HELM directly to homeowners and lay off the real estate exposures to other institutional investors through the offsetting SwapRentSM contracts.

None of these four arrangements will require any capital on the city or county government's part to run the on-going operations. It could also easily be structured as a 100% self-funded, not-for-profit operation by the city or county governments without even the need of funding for operational expenses. Again this SwapRentSM Project is simply to help the city and county governments build a new channel to bring fresh money from proper institutional investors to their local homeowners, similar to its normal role to promote economic development and prosperity on the business side.

The more the local governments participate in the process the more the investors will feel comfortable and be willingly to pump money into their local communities. This is simply based on the true spirit of how a genuine free market would normally operate. These are all part of the operational issues we will explore together with the internal project team during the consultancy period in order to come up with the most appropriate mode operandi for each city and county.

FAQ #7 Why would investors feel more comfortable dealing with the city or county governments instead of dealing with homeowners directly? What economic value does the municipality perform?

The hands-off approach by the local governments in the past to allow the unregulated and unscrupulous private sector financial institutions to come in to their local communities, make a mess, take the profit and leave had contributed to our mortgage mess in many cities and counties. The property value and utility taxes are the lifeline that the city and county finances rely on. It is left for the city and county governments to urgently fix these problems now before the problems deteriorate further.

The government's role in a capitalism society is usually to create rules and promote economic prosperity based on those rules. Free market means that playing the fair game within those rules then the prosperity will come. That is exactly what we are asking the municipalities to do now, so that the free market investors will come in, out of their own will, to rescue the local city and county economy if they think that these city and county overnments are willing to make the proactive efforts to restore the local economic prosperity and to invite new investment capital into the local communities. To implement the SwapRentSM project, all they need to do is to make the efforts to prevent potential foul play by the homeowners. In another word, the investors should be made comfortable through the participation of the local governments that they will be able to secure the potential return in the future that they deserve by taking the risks now. Or else, this free market capital will simply go somewhere else where they feel more comfortable.

In investment terms, the institutional investors would be interested in adding the residential real estate market risk exposure in their long term investment portfolio to further diversify the portfolio risks. That is the key difference between professional institutional investors and individual speculators - they don't simply bet whether a particular asset class will or will not go up. All they want is to have a prudent asset allocation for the long term since no one will be able to predict the performance outcome of any particular asset class in the future.

However a conventional mortgage financial product may not be the right candidate to add this residential real estate market exposure since investment in a traditional residential mortgage will expose the investors to interest rate risk and borrower credit risk, in addition to the real estate
market risk. The Generic, AG and DP SwapRentSM contracts allow the investors to expose themselves only to the real estate market risk and are therefore much more useful in their investment decision making process.

When the city and county governments continue to deal with the homeowners using a shared appreciation mortgage product such as HELM, and then transfer the extracted real estate market risk in the form of a SwapRentSM contract to the investors, it will help shield the investors from
the potential homeowner credit risks. This is a major free market economic function that the municipality could easily provide.

The most encouraging thing is that most of the municipalities have already been offering these conventional shared appreciation mortgage products to their local homeowners in the past. There is nothing new that needs to be introduced in terms of the political framework. Even the recently passed Housing Bill will let the US federal government be the lien holder to collect the potential shared appreciation from the homeowners.

SwapRentSM and HELM are only the improved business methods over the conventional shared appreciation mortgages that will allow the property lien holders to quantify, extract out the real estate market risk and pass them on to other investors in order to create a secondary trading
market and hence the associated economic benefits for all the market participants.

Further down the road as the familiarity with the new "economic renting" concept and the SwapRentSM related methodologies evolves, the smarter and more financially sophisticated local municipal governments could also offer the AG SwapRentSM contracts directly to the individual investors around the world to create virtually economic landlord citizens for their cities and counties and get actual money piped into their local communities at the same time for economic growth. Furthermore, the local governments could also offer DP SwapRentSM to their own local homeowners to derive income to better manage their own municipal finances. This new municipal housing finance system will be the free market capitalism practiced at its best. Hopefully this may happen soon as the result of the impetus to learn and adopt new things due to the current economic crisis.

Again, one thing for those new idea phobics to remember is that, like it or not, the use of the simple concept of shared appreciation as the viable way to get our country out of these severe economic problems is here to stay --- even the recently signed Housing Bill is letting the US federal government be the lien holder to collect the shared appreciation from the homeowners they have provided assistance to in the future. SwapRentSM, together with HELM is only the improved free market version of those older conventional shared appreciation products so that the assistance
money does not have to come from the taxpayers. These new innovative solutions are here for the diligent municipalities to take advantage of in order to save their own local government finances, their local economies as well as the social and economic well being of their local citizens.

FAQ #8: What are the advantages of the SwapRentSM program over the new Housing Bill?

SwapRentSM and its embedded mortgage product HELM were originally created to offer people better ways to manage their property ownership. Low income families could use it to enjoy bigger and better homes due to the true housing affordability offered by the SwapRentSM methodology (leveraging function). Affluent people could also use it to prevent the potential wealth erosion due to property value loss created by incompetent national economic and monetary policies (hedging function). The SwapRentSM business methodologies are the results of over 6 years' dedicated independent and privately funded research, not an emergency plan hastily put together by unprepared people to deal with these issues in response to a national crisis. The major ideas in the SwapRentSM related pending patents were to come up with a better plan than the conventional shared appreciation mortgages that the solution in the new Housing Bill really belongs to. Here are a few examples of the most obvious advantages of SwapRentSM:

1. It saves homeowners money and hassle. There is no need to do re-financing at all for the defaulting homeowners to get assistance to hang on to their homes. They could save plenty of unnecessary re-financing cost to be paid to the financial institutions, including the 1.5% mortgage insurance fee to the federal government.

2. The SwapRentSM program could offer transparent fair value pricing for the shared appreciation and contract early termination possibilities. The homeowners could simply get a fair value monthly subsidy in return for sharing part of the appreciation with the local city and county governments for a certain period of time so that they could continue to afford the mortgage payments and hence continue their home ownership and residence. The local city and county governments in turn transfer that shared appreciation potential to other free market investors for a fair value which represent the monthly subsidies that the homeowners would receive. SwapRentSM and HELM simply quantify the shared appreciation potential and its associated risks, extract them out from the shared appreciation mortgages and form a secondary trading market to offer fair value price discovery and early termination possibilities for homeowners.

3. There are a lot more options or choices for the consumers and potential investors. The shared appreciation agreement maturity could be 2, 3, 5, 10, 15, 20 or 30 years as compared to the one and only 30 years fixed rate mortgage option offered in the Housing Bill. The shared appreciation
percentage could also be selected by the homeowners such as 10%, 20%, 30%, ... 50%, 60%, 70%, ... or 100% as compared to the one and only fixed schedule offered by the Housing Bill. To draw an analogy, if the Housing Bill offer is like one plastic molded toy, the SwapRentSM approach could be considered as a LEGO (TM) approach which building blocks could be put together to recreate any color, shape or form of a particular toy when necessary due to its quantified component approach. SwapRentSM rates and flexible contract terms are completely negotiable between homeowners and investors in a free, open and transparent market. It is not a"take it or leave it" one recipe rescue plan approach as offered by the Housing Bill.

4. The housing affordability offered by the SwapRentSM program could be offered to all people, either the defaulting homeowners (including some of those who may have made mistakes in the past about their personal income data in order to obtain the troubling mortgages they have now) or
anyone else who may like to use the fair market value subsidy to buy up a foreclosed home with no bells, whistles or any stringent restrictions attached. This will definitely cover a lot more ground than the current Housing Bill could ever do to save our economy. The potential uses and their
associated economic benefits of SwapRentSM go way beyond the current foreclosure prevention but all these other benefits could all be established and realized in just one single set-up effort.

5. The patent pending SwapRentSM approach will allow the federal or local government shared appreciation mortgage providers to recycle the assistance funds. By extracting out the appreciation potential in the form of the SwapRentSM contracts, selling them in a secondary market to other
investors and getting the capital back to benefit other potential homeowners in need, the governments would not have to use more taxpayers' money as locked up fund to punt for potential future real estate market recovery. This new economic function of capital regeneration through a tradable secondary market that a SwapRentSM transaction provides to the shared appreciation component is similar to what securitization used to provide to the underlying mortgages per se in the past.

There are a lot more advantages but they are too numerous to list. Please feel free to contact us for further information. All in all it is a great thing now that the masses have to start learning and accept the generic shared appreciation concept as a viable way for housing finance going forward in the US. In short, the true housing affordability could be realized when potential homeowners learn not to bite more than they could chew. If the homeowners do not have the income ability then either they don't buy at all or they should agree to share the potential property value gain with other people in order to live in a bigger home and to enjoy at least a part of the potential appreciation.

We have in the past two years spent tremendous amount of time to educate people about the simple shared appreciation home equity finance concept. Now that the shared appreciation genie is taken out of the bottle through the introduction of the new Housing Bill, we may no longer have to sell the simple shared appreciation concept anymore, but rather to focus on selling why the SwapRentSM approach is better than the conventional non-property derivatives based shared appreciation mortgages which again the Housing Bill solution belongs to. To draw another analogy again, it is like we no longer have to sell to people why mobile phones are better than fixed line corded phones, but rather only to spend time on explaining why an iPod may be better than a bulky platform shoe Motorola cell phone. Let's hope it will be all downhill from here ...

Our parent company Advanced e-Financial Technologies, Inc. (AeFT) currently offers the SwapRentSM Project as a licensing consultancy project to help city and county governments set up their own private label brand of homeowners assistance program since obviously the Housing Bill will not be sufficient to rescue the deteriorating city or county government finances as a result of the property value erosion. The longer they wait, continue to put the false hope on a miracle federal or state help and use it as an excuse to take no initiatives themselves to fix the local economic problems, the closer they may get to follow the City of Vallejo's foot step. It is not private sector business' responsibility to fix the local economy either. The free market capital will only flow to those communities that the free market investors think that the local governments do care and indeed are committed to do something about the serious problems in order to maintain and promote the local economic prosperity.

REIDeX, Inc. helps the municipalities with all the transactional logistics and operational support as well as finding potential matching institutional investors so that no taxpayers' money will ever be necessary to get their local communities and our nation out of this current mortgage mess. Here is a chance for the local governments to prove they could be better public servants than those federal folks by putting the necessary political will and managerial power behind the SwapRentSM plan to create an operational success and turn our national economy around.