AgentIndustry News

Could NAR’s ‘BRED mortgage’ breed more equity for homeowners?

Association’s proposal disrupts current mortgage structures with product intended to give homeowners ways to build equity faster
  • Director of Housing Finance and Regional Economics Ken Fears at the National Association of Realtors (NAR) has conceptualized a new mortgage loan product that aims to blend several existing mortgage structures into one, taking the pros of each while minimizing their cons.
  • The concept, called the Blended Rate Equity Driver (BRED) mortgage, may give homeowners a way to build equity in their homes faster than they currently do.
  • By combining the most dominant and liquid mortgage structures -- the 30-year FRM, a 15-year FRM and the 5/1 adjustable rate mortgage (ARM) -- into a single, first-lien mortgage, the BRED mortgage helps to build equity faster through principle payments.

Seeking a way to put more money into homeowners’ pockets, Director of Housing Finance and Regional Economics Ken Fears at the National Association of Realtors (NAR) has put forth a proposed new mortgage loan product that aims to blend several existing mortgage structures into one, taking the pros of each while minimizing their cons. The concept, called the Blended Rate Equity Driver (BRED) mortgage, may give homeowners a way to build equity in their homes faster than they currently do with a traditional 30-year, fixed rate mortgage (FRM). Although the FRM is popular among consumers, allowing them to easily budget for relatively low monthly payments over a 30-year amortization period and offering pricing advantages for the secondary market, this mortgage has many drawbacks -- the biggest of which, NAR argues, is the time it takes homeowners to build equity, making it difficult for homeowners to refinance or sell their homes. “The housing market would benefit from innov...