PRIMARQ is looking to the concept of online capital formation to give homeowners a better stake in the housing market. By “uniting homebuyers and homeowners with investors in a marketplace for the trade of residential real estate equity,” the company aims to bring measurable benefits to homebuyers, homeowners, investors, lenders and brokers.
“We believe the current method of housing finance has created systemic risk, and there is a need to rethink the level of debt being employed,” said PRIMARQ Founder and CEO Steve Cinelli. “Equity funds provided by investors, which share both the upside and downside of property price movement and complement homebuyers’ own contribution, create a more sustainable homeownership structure.”
The way the PRIMARQ five-step structure works:
1. A residential property for purchase or refinance is submitted to the PRIMARQ exchange. PRIMARQ reviews the projected performance of the property using third-party data, and assesses the mortgage level and credit quality of the homebuyer. Assuming the criteria are met, the investment is posted as an offering to the investor side of the market.
2. Investors submit bids, designated as a "Q" position, to participate in the investment (1Q = $10,000 purchase equity holding). Investors then submit funds to escrow upon acceptance of that bid.
3. Funds are present and financial contingencies associated with PRIMARQ are met. Other elements of the home financing (buyer downpayment and loan) are simultaneously coordinated, and the mortgage loan is approved based on lower loan-to-value (LTV) and debt-to-income (DTI) ratios, due to the incremental investor equity.
4. Escrow and closing honors the current methodology and schedule and the homeowner enjoys full occupancy and improvement rights.
5. Investors are seeking appreciation in the property and need not wait until the property is sold or refinanced but may monetize positions through access to the secondary market for Q trading.
“Lending at the current levels against a volatile and illiquid asset defies basic credit principles,” said Cinelli. “We have learned that markets rise and fall, though lenders continue to behave as though values will only move in one direction. Lenders are not intended to take price risk, and them doing so precipitated today’s housing bubble rubble.”
Only time will tell before new models of finance and capital formation, spearheaded by PRIMARQ, will excel in the volatile housing finance marketplace. But until proven otherwise, PRIMARQ’s online private equity concept aspires to kick-start the American dream of homeownership into a new reality.
“Not only do we believe our approach brings prudence to the homeowner’s financing, but we enable investors to participate in a new way in one of our largest asset classes, passively, transparently and on an informed basis,” said Cinelli.
