Jorge Newbery was one of the first people I met when I joined the crowdfunding world. I heard him speak forcefully about how he used the trials of his past to bring about massive change in his personal life and to create a business that could change other lives too. That business is American Homeowner Preservation, a crowdfunding platform that pools underperforming mortgages into investment vehicles while allowing financially at-risk tenants to stay in their homes. It’s like a neighborhood stabilization program wrapped up in a crowdfunding website. Jorge and I recently spoke about his work.
EP: What gets you up every morning?
Jorge: 76% of Americans live paycheck to paycheck. 43% of Americans spend more than they make. In 2013, the average net worth of America’s 400 richest rose by $800 million each, while the median net worth of African-American families dropped to $4,995, poorer than the average household in India. For the sake of everyone, rich and poor, we must correct this situation. The rising income and net worth gaps in our country must be reversed. American Homeowner Preservation helps mitigate this situation. At this point, our impact is very, very modest. There are millions of families in need and we help just thousands. We need to attract more capital and strengthen our infrastructure and processes in order to help many more families.
What do you love about what you do?
AHP is a market solution to a social problem. With Wall Street’s often-predatory financial products, there is typically a winner (Wall Street) and a loser (consumer). AHP generates strong returns for our investors, but it’s not off the backs off consumers – it’s by sharing the discounts we negotiate with the banks and hedge funds which sell us non-performing mortgages. The only perceived “loser” is the banks and hedge funds, but they are selling to us at prices they would sell to someone else for, so even the banks and hedge funds “win.” To answer directly, I love that we can deliver transformative financial solutions to struggling families and generate strong returns for investors.
How did you happen on crowdfunding? What does it solve for you?
I saw an Angel List listing for RealtyMogul in early 2013 and made an investment in their first online offering: that was my introduction to equity crowdfunding. The ability to share our offerings was the biggest for me. Now, with Regulation A+, we also have the ability to accept non-accredited investors with investments as small as $100, which ties in perfectly with our social mission: it’s no longer just the rich helping the poor, but now just about anyone can participate.
How exactly does AHP keep people in their homes?
Let’s say a family owes $100,000 on their mortgage but the home’s value has dropped to $50,000. If the family experienced job loss, divorce, unexpected medical expenses, death in the family, or for any other reason fell behind on their mortgage payments, their lender will likely start foreclosure. At some point, many lenders decide to sell these mortgages, especially in the low- and moderate-income neighborhoods where we focus our efforts. We can typically purchase for 30 – 50% of the current home value, so $15,000-25,000 of the $50,000 value. We then have great flexibility to offer homeowners transformative modifications and lump-sum settlements if they want to stay, or cash to sign a deed in lieu if the home is vacant or they no longer want to stay.
Why did you choose Reg A+ to package your offerings?
The ability to accept investments from non-accredited investors was a big draw, plus the fact that we could raise up to $50 million. We can now market broadly and just about anyone can participate. Before, using Reg D, we could only accept the 3 – 5% of the population who are accredited. The $50 million cap gives us the ability to scale and grow AHP both as a business and a tool for social change.
What do you think you could do better?
We are constantly improving our technology, processes, and building our team. I am not good at delegating and my inclination is to micro-manage. However, those are two constraints on AHP’s growth. I have stepped back into the role of coach and no longer play any of the positions on the field. My focus instead is recruiting the best team possible – both employees and vendors – in order to maximize the impact AHP can have.
What do you think you have solved?
This is “in-process” but our team is getting very strong. There are defined roles which each team member is playing and, if something happens to that team member, then we can readily plug in another player. This is allowing AHP to grow successfully and help more families.
What’s the ultimate goal for AHP?
There are hundreds of billions of dollars of troubled mortgages – and we want to buy more and more so we can help more and more families. We need to correct this societal problem, keep families in their homes, and reverse the rising wealth gaps in our country. AHP is a tool to do that.
To learn more about Jorge and his work with AHP, visit ahpfund.com.