They say that some of the best ideas are also the simplest. When millions lost their homes, savings, and jobs in 2008, we all felt the impact. Some more than others. But as a country, we endured – and absorbed profound truths about personal finance in the process. And while the economic picture is brightening, we are passionate about safeguarding our families, our communities, and our country from another economic free fall. We don’t just want to change the way people think about mortgages: We seek to revolutionize the entire industry from the bottom up. After living through the Great Recession and its aftermath, we realized that someone needed to say enough is enough.
Over the past five years, we have dedicated ourselves to a simple yet revolutionary idea: That a mortgage borrower’s monthly payment should mimic the value patterns of local homes in the area. If the value of neighboring homes decline, then a borrower’s monthly payment will adjust accordingly. Think: A self-regulated mortgage based on real-time value of local homes. A borrower will never pay more than their original rate, but is safeguarded against a changing market.
We first encountered this idea in the book House of Debt. Dylan was a research assistant for the book, which was shortlisted for the 2014 Financial Times Business Book of the Year. Authors Atif Mian and Amir Sufi explained why the Great Recession occurred and how we could prevent it from happening again. They proposed a mortgage whose payments adjust when local home values fall. Yet despite praise from economics circles and the occasional thought experiment editorial, the trillion-dollar mortgage market yawned: “Why change?”
So we left any semblance of a normal life behind in 2014 to make this idea a reality and tackle the indifference from big finance and big government. Along the way, we Airbnb’ed out our bedroom to make rent, funded the idea with side consulting contracts, and evangelized the idea to mortgage borrowers, regulators, servicers, investors, lenders, real estate agents, and anyone who would let us buy them a cup of coffee. We spent countless nights wondering whether we would ever succeed–and whether anyone would care. We became mortgage originators, started a licensed real estate company, learned how to price mortgages, figured out risk arbitrage, and defined and redefined the product as we began to understand what it would take for our product to succeed.
Today, we are proud to introduce the Safe Rate Mortgage. We believe it is the start of a mortgage revolution. Many people are angry about what happened during the Great Recession, and they should be. We should expect better mortgage products that put the buyer first. Regulators should support products that protect homeowners, taxpayer dollars, and our economy as a whole. And investors should be adequately compensated for the risks they take. Helping homeowners and generating solid returns for investors are not mutually exclusive: By creating a product that efficiently mitigates house price risk in the marketplace, we make sure everyone is better off.
We created the Safe Rate Mortgage as an alternative to private mortgage insurance (PMI) for borrowers with down payments of less than 20%. When local house prices fall, the borrower’s interest rate falls automatically. These savings never have to be repaid. Investors are adequately compensated for the risk they are taking, and they lower a borrower’s monthly payments to prevent defaults and protect their principal.
We became Safe Rate’s inaugural customers when we purchased our first home in 2018, and we believe this is an idea for everyone: Mortgage borrowers are less likely to default by saving money during market downturns. Mortgage investors receive competitive risk-adjusted returns, and do not expect a government guaranteed return from the United States taxpayer.
Now we need your help. Until now our work has been anonymous, known only to our friends and family and the patient people we have pestered along the way. We are not people who seek the spotlight, nor have we ever understood its glare. But to change the mortgage market, it will take tens of thousands of people to stand together and say that they want the Safe Rate Mortgage. We started this campaign to raise awareness, prove that there is demand, and better socialize the product that we have poured our hearts and souls into over these past five years.
We have gotten it this far, and now it is up to you. Please join us in making sure every mortgage borrower is able to buy a home with confidence. Help us deliver a resounding message to the mortgage market: “Yes! We believe in the Safe Rate Mortgage.”
Shima Rayej and Dylan Hall