an open letter to the us treasury regarding the recent discussions with nar, nahb and fdic on...

8/8/2019 An Open Letter to the US Treasury Regarding the Recent Discussions With NAR, NAHB and FDIC on SwapRent - Sw

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SwapRent.com Blog

Shared Appreciation through Shared Cash Flows the New Economic Owning, Renting and Own-Rent

Switching Concepts as well as Business Methods for Managing Real Estate Properties

http://www.SwapRent.com

10/15/2010 Foreign exchange rate is the competency report card of a governments ability to manage a

countrys economy

11/02/2010 From elephant seals colonies to emperor penguins rookeries a few thoughts on the FARJHO

matching process

10/16/2010 An open letter to the US Treasury regarding the

recent discussions with NAR, NAHB and FDIC on SwapRent

Date: Sat, 16 Oct 2010 14:42:30 -0700

To: Jeffrey Goldstein

From: Ralph Liu

Subject: Recent discussions with NAR, NAHB and FDIC on SwapRent

Dear Mr. Goldstein, Deputy Treasury Secretary for Domestic Finance,

bcc: relevant Administration, State and Congressional colleagues

I hope you and your colleagues have had a chance to review the information I sent to you on August 28th.

Here below is some information regarding our efforts to work with industry groups and some government

agencies to help revive the property markets, establish a new alternative housing finance system and to help ourcountry restore our economic prosperity. Please kindly review again the attached articles or the recent blog post

by Larry Doyle for an executive summary:

http://www.senseoncents.com/2010/08/alternative-housing-finance-how-does-swaprent-work/#more-22025

Although everybody relevant from different levels of governments, NGOs and academics around the world we

have spoken to within the past few years who have studied the SwapRent proposal thought it would make great

sense for the US government to take immediate action on it. Many others who may have a role in its

implementation seem to like to pass the ball back to your court, citing potential political obstacles. Please feel

free to let me know if you would like to see what others say if that may be important to you and your colleagues.

It has been over 3 years since I first presented our SwapRent proposal in July 2007 to Treasury, the Fed and the

various departments and agencies of the Administration before the financial crisis started. At this juncture, it is

getting more and more costly day by day to continue to risk our countrys future on those conventional monetary

or arcane fiscal economic stimulus policies that have been proven to be not working now.

Piling up more debts and flood the market with more easy credits in those old conventional monetary and fiscal

policies (which caused the current troubles to begin with) may have worked once upon a time in history for some

rich countries or countries with real competitive productivity in the past (including the US) but probably not for

1/10/2011 10/16/2010 An open letter to the US Tre

swaprent.com//10162010-an-open-let 1/


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some governments with a broken coffer and bloated debt obligations now. Those desperate attempts to put

down more chips from borrowed money on the gaming table trying to gambling back all that has been lost remind

people of those rogue traders who eventually brought down the banks. The simple truth is that no one has access

to unlimited borrowed capital to keep repeating the games and oftentimes the apocalyptic judgement day

beckons way before lady luck does.

As mentioned below, social sciences evolve with innovations just like the technology world would. Governments,

academics and private sectors may need to have an open mind to keep up with the time and think outside the

box. People need to wake up and think straight that we are not in the 30s anymore. Further delay in adopting

alternative innovative approaches may certainly create irrevocable consequences to our countrys economic

future. History will tell.

I do hope that I may be saying something you and your colleagues already know and that you may have some

other credible plans on your own but for better political transparency and accountability, would you and your

colleagues at both the Treasury and at the Fed kindly consider providing a public stance on these over 3-year old

SwapRent related proposals to the Administration, as requested by the leading industry groups below? Thanks

again.

P.S. Please kindly focus on the merits and the execution details of the SwapRent proposal itself, not other

tangential considerations. I apologize for the somewhat impatient tone of this message and I have no intention to

offend anyone, just a simple desire to help save our countrys economic future with your assistance on actual

actions or an open democratic debate if inactions.

==============

Date: Fri, 15 Oct 2010 09:30:51 -0700

To: Lawrence Yun

From: Ralph Liu

Subject: RE: Recent discussions with NAHB and FDIC on SwapRentCc: Jerry Giovaniello, Cliff Niersbach, Kevin Milligan, Paul Bishop, Jed Smith

Sure Larry. I will send you some more relevant info in the next email.

Within the past few years since July 2007, we have received various comments from the Fed, Treasury Dept, the

Administration agencies, state governments, industry groups and many foundations and academics on their views

and stance on the SwapRent proposal. Everybody seems to have been waiting for the others to move first in the

past few years. By now it seems we could gather enough critical mass and momentum to move forward. We may

just need some strong leadership from relevant industry groups.

============

At 09:01 AM 10/15/2010, Lawrence Yun wrote:

Mr. Liu,

Thank you for sharing your idea. It is intriguing and could help the market. However, at this time, we do not

believe it can gain political transaction. I would like to know of response you get from the Treasury Department

on this topic. Thank you again for sending.

Best regards,




3/10

Lawrence Yun

Chief Economist and SVP of Research

National Association of REALTORS

From: Ralph Liu [mailto:[email protected]]

Sent: Friday, October 15, 2010 2:24 AM

To: Dale Stinton

Cc: Vicki Cox Golder; Ron Phipps; Moe Veissi; Jim Helsel; Vince Malta; Brooke Hunt; Jerry Giovaniello; Cliff

Niersbach; Kevin Milligan; Lawrence Yun; Paul Bishop; Jed Smith

Subject: Recent discussions with NAHB and FDIC on SwapRent

Dear Mr. Stinton,

Here below are some recent discussions that I had with NAHB and with FDIC. I hope you and your colleagues

may also find it helpful to understand where SwapRent and FARJHO stand in effectively applying the simple

shared equity related economic concepts and how it could be used to help restore our countrys economy. Since

real estate market is regional by nature with supply and demand limited to a defined geographical area, the

desired implementation economic effects could be accomplished in any city or county on a standalone basis to

create jobs and restore the local economic prosperity. For your kind review and considerations.

Would your organization be interested in getting involved? Thanks again.

=================

Date: Thu, 30 Sep 2010 16:54:41 -0700

To: Ledford, David

From: Ralph Liu

Subject: The new alternative home ownership structure (FARJHO) and the housing finance system (SwapRent)

that could also create jobs and reduce deficits

Cc: Howard, Jerry, Catalde, Brian, Dunn, Sandy J., Robson, Joe, Jones, Bob, , Logan, Mary,

Crowe, Dave,

Dear David,

Thank you for your feedback and comments today on my email to Jerry and other board members. I am glad to

learn that there are more and more people who have come to the realization of the power of these new economic

concepts.

Shared equity and/or shared appreciation related generic concepts are not new and they have mostly been

practiced in the UK for over 30 years. Most recently in the US and Australia we had also seen some new

ventures back in 2007 trying to introduce those same old methods before the mortgage crisis started. These

concepts have not caught on simply because those primitive business methods engaged in the UK, Australia and

the US to provide the economic benefits to consumers were not good enough. There existed plenty of room for

new innovations on new business methods in this field back then, similar to the opportunity of how Steve Jobs

iPhone could potentially replace Gordon Gekkos Motorola platform shoe sized cell phone. Social sciences

evolve with innovations just like technologies would.




4/10

That was exactly the reason why the deliberate research efforts of the SwapRent method, its subsequent

simplified version of FARJHO and their related various new mortgage instruments and markets were originally

embarked on and were subsequently invented back in 2006. These events were chronicled in the original patent

applications back in 2006 and many subsequent academic publications or in many leading trade journals listed on

the SwapRent.com web site. In short, SwapRent and FARJHO represent the more mature and the latest

developments in the evolution spectrum of the shared equity or shared appreciation concept to own homes.

Without the crisis in 2008 few would pay attention to and appreciate the timely new economic utilities of these

new inventions of real business methods to make the simple shared equity concept practical and possible but

these new inventions were not created in 2006 to simply anticipate and cater to some particular needs of solving

the crisis, such as rescuing the underwater houses as you had brought up. These new inventions together would

provide an alternative housing finance system with many potential application opportunities that have very broad

implications to our capitalism society.

The beauty of all these inventions is that these new economic benefits would be made available to everyone on a

pure free market basis. Nobody would force anybody to accept and give up anything unwillingly. Consumers

make their own choices for their own good. If some folks do not like some particular applications for ideological,

religious, opinionated, individual preferences and tastes or any other reasons, they could simply skip thoseapplications and move on with those that would make more sense to them in their particular situations.

Below is some more recent info on what I have shared with some of the government agencies similar to what I

have shared most recently with Jerry et al before. Please feel free to let me know if you would like review some

more detailed comments from the senior executives at our federal, state governments, banks, home builders,

Wall Street firms, congressional staff members, G7 and other central banks in Asia, Europe and the Middle East

as well as many think tanks and leading academics around the world regarding our advanced discussions within

the past few years on the potential applications of SwapRent and FARJHO to date to implement those economic

ideas in their countries.

Regarding the investors sentiments in a particular country, the whole idea of the proposed economic

implementation strategy is to make it a self-fulfilling prophecy without using debt. The more free market

participation the more likely the property prices will indeed rise, hence the more likely the economic prosperity

will be brought back up, hence the more likely the investors will make money and hence the more likely investors

will flock to offer to provide the SwapRent cashflows to property owners who are willing to do this exhange of

cashflows for appreication potential. It may be similar to how the Fed uses monetary policy to lower the interest

rates to stimulate the economy or to corner the property market up in the past but there is no debt involved

this time around.

Now that many people have understood the powerless state of the conventional monetary policy to channelcredit down to the small businessmen and property owners in the local communities across America in order to

restore our economic prosperity, perhaps it may be time to consider using some new innovative equity based

home financing methods such as SwapRent to stimulate the economy or to corner the market up. These

concepts and specific detailed methods on what the government or central banks could do are described in the

HFI-IUHF paper that I have published.

To answer your questions, due to the simplicity of the new variation of the FARJHO structure we have received

tremendous consumer demand at http://www.InvestorsAlly.com . Since the scale of the more sophisticated but

much more powerful SwapRent project at http://www.REIDeX.com may be much bigger than a typical




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entrepreneurial project could handle due to the current crisis and public perception, we are very eager to work

with organizations like yours to re-design it and set it up to benefit our country for the greater good as explained

to the government agency below.

We would be quite happy to let these not-for-profit organizations take the lead in coming up with a new structure

that may make sense for our country. If it is on a pure NFP basis, foundations such as MacArthur, Ford and

Milken Institute, Peterson Institute etc. which we have been in touch with in the past few years may participate as

well let alone some of the government agencies if some credible organization like yours is willing to take the lead.

If it is on a commercial basis, each home builder member of your organization could simply become a share

holder of REIDeX, Inc. and your organization could play a leading coordination role in making this happen for

the benefits of your members while doing good to the homeowners and our society in general at the same time. If

this is of interest to you please feel free to make any other suggestions that your board members may feel more

comfortable with.

Please do not hesitate to call me for a more in-depth discussion. Thanks again.

============

At 03:04 PM 9/30/2010, Ledford, David wrote:

Mr. Liu,

Jerry Howard asked me to respond to the information you provided on the SwapRent and FARJHO programs.

These are interesting variations on the concepts of shared-equity financing and lease-to-own homeownership

programs that have been employed in various forms for a number of years. I am interested in following up with

you to get more information on the activity you are seeing with your versions of these programs. NAHB is

strongly interested in finding effective means of reducing the overhang of unsold homes and exploring effective

means to do so.

I do have reservations on the prospects for gaining support for using the SwapRent program as a means of

addressing the problem of underwater mortgages and related mortgage foreclosures. The SwapRent program is

innovative in providing a cash flow to homeowners in exchange for a piece of the future upside on prices, with the

goal of increasing consumer consumption and stimulating the economy. However, attempting to address the

foreclosure crisis by bringing in equity to upside down borrowers would require large federal and/or private

subsidies, which are not likely to be forthcoming in the foreseeable future. It seems there would be particular

difficulty in convincing investors to make such a major bet on appreciation in home values in an ongoing period of

price instability, and the current political tarnish on programs aimed at expanding homeownership would greatly

impede efforts to gain legislative support for providing public funds for such a program.

In short, the objectives of such a program are at odds with current economic and political perceptions and,

therefore, seem unlikely to be achieved. While the program may have some potential to be utilized over the very

long run, I don?t see it getting any traction any time soon.

Thanks for sharing this information with us.

Best regards,




6/10

DAVID L. LEDFORD

National Association of Home Builders

============

Date: Wed, 08 Sep 2010 12:59:43 -0700

To: Krimminger, Michael H.

From: Ralph Liu

Subject: Re: FW: SwapRent as a new alternative economic policy management tool for governments

Cc: Rowley, Clare D. , Eliopoulos, George , Bair, Sheila C.

Thanks for your note Mr. Krimminger. Most Americans would probably prefer to see these new services remain

entrepreneurial and run by private sectors to create jobs based on pure free market principles, rather than being

run and managed by the government itself.

The role that agencies such as FDIC could get involved actively is probably to become the active users of

SwapRent to more efficiently and effectively accomplish its various missions that you have described below. As

you probably have already understood that there is no need to come up with the money and provide any subsidy

as a give-away in the SwapRent system. Governments as users only play the role as a facilitator or a middleman

to channel the capital from the private sectors to solve the problems of distressed loans held by the banks, the

same economic role of a middleman that the GSEs were originally supposed to play, irrespective of their failed

methods and financing structures.

As a potential active user of SwapRent that could help taxpayers benefit directly from these new advantages that

SwapRent may provide in helping manage the failed banks, perhaps you would consider staying closely involved

in our quest to make this happen with the various government entities, or even taking a more active role to

champion it.

I realize that due to the scale of the program, unless the government stays behind the project of creating an active

market for SwapRent contracts it may not give people the necessary degree of comfort to start using these new

innovative services to help restore our countrys economic prosperity. I am quite willing to contribute whatever it

may be necessary to make it work for the greater good.

I will continue to follow up with Treasury Department and Congressional members to see if somebody is willing

to take the opportunity to champion this project for the greater good. The reward for them would go beyond

helping them accomplish their political goals in providing a timely public service that would really help many

people in need. History will certain record their pro-active contributions when the tides of economic tsunamis

were curbed by their pioneering efforts to implement these new innovative solutions. They might deserve a NobelPeace Prize much more than some other leading politicians did!

Meanwhile if you and your colleagues feel you might be able to further assist us in directing us to the exact prope

people within the Administration to help make it happen together, please feel free to let me know. Thanks again.

==========

At 11:57 AM 9/8/2010, Krimminger, Michael H. wrote:

Mr Liu,




7/10

I am the Deputy for Policy to Chairman Bair. She asked me to respond to your email once we had had an

opportunity to review your proposal.

We do appreciate your contacting us. The FDIC welcomes innovative solutions to the current home foreclosure

crisis. Your proposal is thorough; however the FDIC is not the appropriate federal agency to facilitate the

creation of such an exchange. While the FDIC is working with many borrowers to address their distress on loans

made by failed banks, we are seeking to recover value or sell those loans and are not in a position to subsidize

them as suggested in your proposal. We would suggest that you follow-up with Treasury to determine if they are

considering additional programs to address broader housing distress. Thank you again for your proposal,

Best regards,

Michael Krimminger

Deputy to the Chairman for Policy

Federal Deposit Insurance Corporation

From: Bair, Sheila C.

Sent: Monday, August 30, 2010 1:01 PM

To: Ralph Liu

Cc: Rowley, Clare D.

Subject: RE: SwapRent as a new alternative economic policy management tool for governments

Thanks. Will take a look.

From: Ralph Liu [ mailto:[email protected]]

Sent: Wednesday, August 25, 2010 2:07 PM

To: Bair, Sheila C.

Cc: Rowley, Clare D.

Subject: Fwd: SwapRent as a new alternative economic policy management tool for governments

Dear Chairman Bair,

For your kind review and comments. Thanks again.

==============

Date: Sat, 28 Aug 2010 14:39:10 -0700


From: Ralph Liu

Subject: SwapRent as a new alternative economic policy management tool for governments and central banks

Dear Mr. Goldstein, Deputy Treasury Secretary for Domestic Finance,

bcc: relevant Administration, State and Congressional colleagues

Here below is a link to a recent public blog post by Wall Street veteran Larry Doyle on how the governments

could take advantage of the SwapRent contracts to help our country de-leverage, stimulate the economy and

create jobs at the same time. For yours and your relevant colleagues further kind review and considerations.

Thanks again.




8/10

http://www.senseoncents.com/2010/08/alternative-housing-finance-how-does-swaprent-work/#more-22025

===============

Date: Wed, 18 Aug 2010 17:41:27 -0700


From: Ralph Liu

Subject: FARJHO at InvestorsAlly.com and SwapRent at REIDeX.com

Dear Mr. Goldstein,

I wonder whether you have been forwarded information on SwapRent in the past by many of your colleagues at

the Treasury Department which I have corresponded with since July 2007. I have also visited some of the

relevant Treasury staff members in their DC office during the previous Administration back in October 2008

while I was invited to DC by the Milken Institute to speak at their Housing Finance Innovations Lab.

In light of the conference on the future of housing finance yesterday, I would like to give you an update and an

introduction to the FARJHO services as a free market based alternative home ownership structure offered at our

recently spun-off new venture InvestorsAlly, Inc. ( http://www.InvestorsAlly.com ). These new services couldalso present a great way for fixer-upper or distressed real estate investors/flippers in either a REIT or a private

equity real estate fund to have a quicker exit strategy by offering a genuine housing affordability to homeowners.

Some of the more sophisticated investors may also be interested in the more advanced SwapRent-based

arbitrage trading strategies of distressed mortgages/trust deeds on commercial properties as described below.

The simple way to describe the business model for InvestorsAlly is an Internet-based peer-to-peer marketplace

for aspiring home owners and would-be property investors to meet and negotiate, combined with conventional

real estate franchisee brokerage offices across the country. Although it has an Internet based operation for

gathering and capturing investors, the actual operations of the property transactions for homeowners will be done

by the local franchisee agents across the country in shopping centers or office complexes in each city to help

conclude these all equity deals to buy homes.

Although there are a lot of info on our web sites already, here below is a summarized up-to-date introduction to

our FARJHO and SwapRent services from an academic angle as well as some files (referred to as attached) of

recent relevant industry press coverage.

From an economists point of view, you may also be interested in learning more about how central banks and

governments could use SwapRent as the third alternative economic policy management tool, in addition to the

conventional monetary and fiscal policies in order to finally be able to de-leverage and stimulate at the same time.

http://swaprent.com/blog/2009/12/06/12062009-how-small-business-owners-could-use-swaprent-transactions-

to-create-jobs-at-grassroots-level/

http://swaprent.com/blog/2009/11/01/11012009-swaprent-rates-offer-another-new-dimension-for-

governments-to-perform-economic-stimulus-without-resorting-to-lowering-interest-rates-only/

http://swaprent.com/blog/2009/10/13/10132009-how-swaprent-program-could-reduce-the-re-default-rate-

and-create-local-neighborhood-prosperity/




9/10

Please feel free to let me know if you have any questions or comments regarding our efforts to develop these

new innovative home ownership and housing finance system alternatives. Your help and participation would be

highly appreciated. Thanks.

==============

Regarding the academic research of SwapRent as an alternative new housing finance system that I have been

working on for the past few years, please see the recently published article (see attached) on SwapRent at the

Housing Finance International of IUHF (International Union for Housing Finance, http://www.housingfinance.org

).

We have also created a much simpler, non-derivatives based, new joint home ownership structure call FARJHO

The launch of the new services may have a potential impact to our nations housing market. Please see the recent

news coverage in Hedge Fund Alert. More info is available at our recently launched new peer-to-peer multi-

lingual web site http://www.InvestorsAlly.com .

In the current market, through FARJHO, property investors as InvestorsAllys customers could expect around 5

to 7% or even higher current dividend yield while waiting for the market recovery and further price appreciation

of US residential properties without worrying about vacancy or excessive annual operating expenses. The total

return could be quite significant due to the potential price appreciation from many distressed and foreclosed

properties.

The more popular this type of non-debt, fractional interest equity investment to attract fresh capital injection from

around the world to jointly own homes becomes, the more likely the property market will indeed be restored to

its previous value with a non-leveraged stable growth sooner. Homeowners would get to enjoy the social

stability at the same time.

Academically, one of the main economic benefits that both FARJHO and SwapRent contracts, each in their

different ways, provide to investors is to make Single Family Residences (SFR) income producing assets (with astable positive yield like that of owning a rental apartment) and hence made investable by professional institutiona

investors. It would be a great way for pension funds and insurance companies to diversify their portfolios by

extending the investment choices into currently the worlds largest asset class through these new innovative

investment vehicles.

The state, county (and city) public employees and teachers pension funds would be the best candidates to

become the anchor local institutional property investors to help homeowners to co-own homes through the new

FARJHO concept in order to foster local economic revivals and continuing prosperity. They could of course

resell those FARJHO LLC member interests to other free market investors at any time in order to regenerate

and scale up the scope of available capital. Attracting fresh capital from around the world this way to localcommunities could certainly help the state, county and city governments fix their current budget deficits under a

free market mechanism.

Policy-wise, the simple new economic concept is that people would need to start thinking outside the box,

borrowing money to own homes should not be the only way to own homes. Promoting homeownership for socia

good purposes could also be accomplished through partial equity sharing, just like how corporate ownership has

evolved in the last few centuries with the development of a stock market in each country. It is about time that we

should seriously treat equity financing and developing a tradable secondary market of home equities as a viable

way to promote homeownership.




10/10

In addition, with the introduction of the separation of shelter value from the economic value (or usufruct value

from the investment value) of owning a real estate property by the new SwapRent related methodologies and its

secondary market REIDeX, boom and bust cycles created by the investment value of properties and

exacerbated by the abuse of lending/borrowing could easily be avoided and homeowners could get to enjoy the

social stability as long as they stick to the shelter value part of their homeownership.

Although the SwapRent related efforts were originally designed for both residential and commercial properties,

due to the housing related residential mortgage crises, so far most of the attentions have been focused on

developing applications primarily from a residential property owners perspective. The application opportunities

are indeed equally available for commercial property owners to enjoy similar economic benefits. We have only

recently started an effort to offer these services to the commercial real estate investors and distressed mortgage

assets holders. The most relevant article that talks about the trading of distressed mortgages is the attached article

published by SCI (Structured Credit Investors). I have also attached a recent article on SwapRent by National

Mortgage News. The three relevant web sites are listed below in my signature file.

For examples on how to use SwapRent to help trade distressed mortgages or trust deed notes on commercial

properties and CMBS, please kindly review the most recent blog entries on 4/20/2010 and 3/15/2010 at the

following link. http://swaprent.com/blog/ or more conveniently,

http://swaprent.com/blog/2010/04/20/04202010-examples-on-swaprents-commercial-property-applications/

http://swaprent.com/blog/2010/03/15/03152010-commercial-property-applications-of-swaprent-and-pelm/

One interesting concept to note is that the residential SwapRent and FARJHO applications on Single Family

Residences basically make SFR similar to investable income-producing assets like multi-family apartment

complexes and should hence be treated like any other commercial properties for institutional investments going

forward.

Tags: Economic Management Policy, FDIC, Fiscal policy, Jeffrey Goldstein, Monetary policy,NAHB,NAR,

Rogue Trader, SwapRent, Treasury Department

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an open letter to the us treasury regarding the recent discussions with nar, nahb and fdic on...

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