Five years after the unofficial start of the financial crisis, one of the new additions to the
Forbes 400: Definitive Ranking of the Richest Americans(out this morning) made his fortune refinancing underwater homes.
William Erbey is the founder of Ocwen Financial Corporation. In 2010 the company came up with a new way to refinance mortgages called the ‘Shared Appreciation Modification model.’
The way Ocwen refinances, homeowners get 5% equity in their underwater homes, rather than negative equity. Erbey figured this would incentivise homeowners to really keep up with their payments.
When the home is sold, however, Ocwen gets 25% of any profits from the sale.
That model made the 64 year-old Erbey $US2.3 billion.
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