How Point helps homeowners unlock home equity wealth
Eddie Lim, Point CEO, joined Yahoo Finance Live to discuss the state of the housing market and how is real estate fintech company is helping homeowners.
SEANA SMITH: Point, which is a fintech platform, gives financing to homeowners and homebuyers. It has amassed over a billion dollars in new capital commitments from leading real estate and also mortgage backed securities investors for home equity investments. So we want to talk about the growth in this sector, what to expect going forward.
For that, we want to bring in Eddie Lim. He’s the CEO of Point. Eddie, there certainly is a lot of interest in this space. Some of the numbers that you sent over, home equity investment funding search over 100% in the first eight months of the year. What’s fueling that type of growth?
EDDIE LIM: Seana, great to meet you. Thanks for having me here. It’s a great question. We’re seeing really unprecedented demand. On the billion dollar announcement, we now have effectively unlimited supply in the capital side. And really since COVID began, we’ve had unlimited demand on the homeowner side. In fact, all summer we’ve had to turn off email marketing just because there are too many leads in our system.
And so we’re really excited about this. I think one of the interesting opportunities for homeowners, there’s nearly two million homeowners now in forbearance coming out of forbearance over the coming months here. And many of them are going to have payment shock. And our solution with no monthly payments can be very compelling for many of those homeowners.
ADAM SHAPIRO: I am at the web page right now and loving what you got up at the headline, get up to $350,000 with no monthly payments. So again, walk us through how this works because eventually, there’s got to be some kind of payment.
EDDIE LIM: Yes, so Point’s a real estate fintech platform. So it’s a consumer finance product, the first one that’s equity based. And it’s really the first one that allows homeowners to sell equity in their homes. So just like you were pointing out, we invest in your home. It’s a lump sum payment, no monthly payments for up to 30 years. And in exchange we share in the future appreciation in the home.
Now, what’s really compelling to homeowners is that no monthly payment feature, right? And that’s a big aha compared to other products out there like helocs, personal loans, credit cards. Many of those can have very substantial monthly payments, and that’s a really big takeaway for homeowners.
ADAM SHAPIRO: I just wanted to follow up on that because I am a big fan of this product that you are offering. But I’m also a survivor, as most of Americans of what we witnessed in 2008. So how is this different? Because essentially, when you were describing the way it works, what I was hearing was the derivative model for selling of mortgage-backed securities but you’ve taken it to a different level. And there’s risk for you because value sometimes drop in a house. And if you’ve got equity and it drops, you’re out.
EDDIE LIM: These are great questions. Because we are an equity platform and an equity investment, what’s great about this is it creates a natural alignment between Point and the homeowner, right. So when your home goes up in value, you do well, we do well. And we’ve had situations where your home goes down in value and you pay us back less than we gave you. And that’s a really interesting form of alignment here.
On the investor side, what’s really interesting is this is the first time that they have access to the equity in people’s homes. They’ve always had access to the debt. But now it creates some of those diversification benefits and alignment benefits that they haven’t had before.
SEANA SMITH: Eddie, just what’s your assessment of what’s going on in the housing market? Because we’ve been trying to make sense of what we’ve seen play out in the sector over the last year and a half. There still doesn’t seem to be any substantial slowdown in housing. But what’s your take just on what we’re seeing?
EDDIE LIM: I think you’re absolutely right. And this is one thing to Adam’s question about what’s different here this time around is there’s substantially more home equity. So there’s a lot more flexibility for homeowners and there are many more homeowners with equity, right. There are now nearly 40 million homeowners with $100,000 of home equity. And many of them just when they want to access their home equity it’s unavailable.
So we’re definitely seeing the home price appreciation. We’re also seeing costs are really high for home improvements. And that’s been a big use case for our customers as well, is especially that many of them are working at home and they want to do renovations at home but the cost of doing those renovations has skyrocketed and gone through the roof, if you will.
ADAM SHAPIRO: And the key, as you’ve just pointed out, is this is based on equity, whereas in 2007 and 2008 we had liar loans and that was based on debt. So what does the average person who’s come to the platform look like? What’s the average homeowner look like or is it across the board?
EDDIE LIM: Typically, the defining characteristics here, they’re home equity rich but cash constrained. And they’re in a moment of their lives where they’re optimizing to reduce their monthly payments and pay off some expensive credit cards or expensive personal loans, or they just don’t want to take on additional monthly payments for whatever they’re doing. It could be that home improvement. It could be they’re paying for children’s education, could be they’re saving for retirement. But the big compelling piece for our product is that no monthly payment feature for up to 30 years.
SEANA SMITH: All right, Eddie Lim, CEO of Point, it’s a great idea. We wish you all the best. We hope to have you back in a couple of months to check in on how you’re doing. But thanks so much for taking the time to join us.