As someone interested in doing good while doing well, and vice versa, you may be looking for investments that allow you to help others while earning a return. There are many, many choices for how you can pursue this idea. These offerings go by many names: some people call it “impact investing” or “socially responsible investing” or “ESG investing”. On this site, we periodically review the experience that we’ve had with certain investments. As ever, nothing on this site is investment advice; it’s just a description of what we’ve learned and experienced ourselves.
American Homeowner Preservation started out as a non-profit itself (in 2008, according to their LinkedIn page) and then morphed into a for-profit firm in which you can invest today. It is a real estate investment. Basically, the AHP team looks for ways to invest in mortgages and then you invest in their fund. They send you a return each month (ideally) and in the process they make it possible for some people to stay in their homes instead of experiencing foreclosure. Here is how they describe it on their website:
American Homeowner Preservation is an innovative crowd funding platform that uses capital to buy some of the most distressed mortgages in the country at huge discounts. Instead of acting like every other bank or mortgage holder, we actually share these discounts with the people living in these homes. It’s a novel concept called “impact investing,” but we prefer to think of it as just “being decent.”American Homeowner Preservation website, About page, accessed October 30, 2020
So far, our experience with AHP has been positive. Every month, we have received a direct deposit to our savings account for 1/12 of 10% of our original investment, which is what we were led to expect from this fund. In other words, if you had invested $1,000 in AHP, you might expect $100 per year to come back to you by direct deposit, or a passive income stream of $8.33 per month. Much better than a saving account (paying basically nothing) or even a 5-year CD (paying less than 1% per year). You are, of course, taking on more risk than in a savings account or CD to get this higher return.
You don’t receive an equity interest in real estate or in the AHP company, so there is no upside. It is effectively a debt investment, from which you may receive a passive income stream. In theory, you may be able to withdraw your funds, but there is language on the website that makes it clear that they could deny you the ability to withdraw funds if they didn’t have enough cash on hand to honor all redemptions.
If the AHP promotional materials are to be believed, your funds would enable some people to stay in their homes after traditional banks (as founder Jorge Newberry says on his webinars, “Wall Street banks”) have given up on them. Maybe the best way to see it is as offering a “second chance” to people who have fallen behind on their mortgages. Because the big banks–or “Wall Street banks”–have given up on these borrowers, AHP is able to buy the mortgages at a discount and offer a portion of that discount back to homeowners, to their investors, and to themselves as a firm.
As of fall 2020, AHP reports that they have many other offerings and services in the works. They have continued to offer different funds for investors and services for those in the mortgage business. For instance, they are becoming registered as a mortgage servicer. They also have a “PreREO” offering for buying and selling mortgages directly. These additional services may or may not directly benefit investors in their crowdsourcing fund. But the idea of having these additional revenue streams may make AHP a more stable enterprise and might offer access to potential investments, which in turn presumably might help fund investors.
AHP has plenty of risks. It is a small operation with a relatively short track record as a consumer-facing fund (though the website claims 10+ years in the relevant business). There has been turnover in the management team, according to multiple reports, and the founder came back in as the face and leader of the enterprise recently. And you may have to take on faith that they are “keeping people in their homes”; presumably, at some point, if people are not paying, there is no way to keep them in their homes and pay a return to investors as well as salaries and all the costs of doing business.
We will keep reporting back on the direct experience we have had with AHP over time, especially if anything changes. So far, they have performed as they said they would over the course of about a year in the fund.
Looking for other views into AHP?
Listen to a podcast featuring Jorge Newbery, AHP founder, interviewed by passive investing specialist Lane Kawaoka. Here’s another one on Financial Poise Radio. And if you prefer YouTube, here is Mr. Newbery talking about mortgage note investing.