Here's an old article about RADHA from last year. This is the first media coverage on the program. Back then, Feb 08, iIt was still called LETO: Lease To Own.
It was covered by By Alton Gary Simpson
Lead Story
LETO: A Way Out of the Subprime Crisis?
By Alton Gary Simpson
NEW YORK - John "Sri" Raghu Giuffre has been a practicing real estate broker for more than five years and currently works with Mark David of NYC. In his line of work, he has become accustomed to looking at creative financing options for different clients, and among those, lease-to-own purchases are one of the more common types of financing used outside of bank loans. While toying with the lease-to-own model, he believes that he has stumbled upon a solution to the subprime mortgage meltdown that lies at the heart of the financial crisis gripping the nation. And he believes his plan can do it for much less than the other rescue plans making the rounds.
According to Mr. Giuffre, layering a LETO mortgage system with a public/private bailout of subprime homeowners can resolve the financial crisis. Like an auto lease, the cost of the home is divided into two loans. The first loan is paid off over four years while the second is on hold until the first loan is paid off. The second loan is refinanced for either the original owner, who has right of first refusal, or a new buyer. The advantage of the LETO system is that it allows much of the principal to be paid up front in the first loan, thus greatly reducing interest on the total loan amount.
Noting that there are now an estimated 2 million subprime mortgage holders with an average home value of $200,000 for a total of $400 billion in outstanding mortgage holdings, he said that these mortgages stand at about 20% more than what owners and buyers can afford. He explained that a bailout of 20% of this amount - $80 billion --would settle the bulk of these properties. The cost of the bailout is split between the federal, state and local governments, the mortgage holder, the buyer and the seller. Additionally, Mr. Giuffre said that this 20% pay down would make these homes affordable again and would allow Wall Street to sell mortgage backed securities containing subprime mortgages in their holdings because the value of MBS would be reset to a known quantity. He added that this $80 billion commitment could prevent the current subprime crisis from morphing into $400 billion or more financial meltdown.
In short, Mr. Giuffre's LETO mortgage system represents an entirely new loan if not sale, resulting in sales tax revenue for the federal government; property tax revenue for state and local governments; mortgage lenders have sound new loans; investment firms will receive fees from sales of their now quantifiable MBS; and buyers benefit from having lower payments.
"The subprime crisis has the upshot of having a dedicated buyer for most every one of these properties," he said. "Save the homeowner with this 20% bailout and you save the entire system from the home and neighborhood, to local and state governments, all the way up to Wall Street and the global economy itself. Lose the homeowner and everyone loses all the way down the line.""
Mr. Giuffre stated that LETO provides a more comprehensive approach to addressing what's wrong with the nation's real estate market than the Federal Reserve's lowering of interest rates, and the various bailout proposals floating around the U.S. Capitol and included in the $168 billion stimulus package recently signed into law by President Bush. He noted that they either don't directly address the root of the financial crisis - the subprime meltdown - or won't be effective quickly enough to stave off economic ruin. "We have professionals of the subprime mortgage crisis all looking at the problem exactly the same way with the same answers that don't work," he said. "These answers are top down, ivory tower, Wall Street-centric responses. This is not a stock market issue. It's a real estate issue, which is people based - we need to keep people in their homes in order to guarantee the value."
From: Alton Simpson Subject: Re: As per your request
To: "Raghu John" Date: Thursday, February 21, 2008, 2:46 PM
Glad you liked it. The article should be available at http://www.brokeruniverse.com/comtois/ until next Thursday.
Gary
On 2/21/08 2:43 PM, "Raghu John" wrote:
Love it. Thank you, thank you. We have done all we can. We will have to see what the good Lord has in mind from here. lol.
When I clicked on your link, it would not take me to the article, but I was able to view it from your attatchment. Wondering if the article has been moved along already given that your page appears to be a live feed of sorts or if I just have the wrong link for it.
I'll also keep you abreast of any developments on this.
Raghu
--- On Thu, 2/21/08, Alton Simpson wrote:
From: Alton Simpson Subject: As per your request
To: "Raghu John" Date: Thursday, February 21, 2008, 12:56 PM
Hi John:
As per your request, here is a copy of the article as it ran in today's
online edition of BrokerUniverse.com. I hope I was able to accurately
capture the LETO mortgage system within the limited space available.
Thanks for your time and consideration.
Gary
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