Our recent study of a homeownership support nonprofit in New Mexico called Homewise suggests there is an alternative way of providing sustainable homeownership to people who don’t have enough money for a large down payment.

Through this model, Homewise issues two mortgages—the first is for 80 percent of the home’s value, and the second is for 18 percent.

The first mortgage is resold on the secondary market to raise capital for additional clients, and Homewise holds on to the riskier second mortgage so that the client pays only a 2 percent down payment while still eliminating the need for mortgage insurance. Homewise services both loans so that they can monitor loan performance on each and intervene early if there is a problem.

Homewise also offers a suite of other services including financial counseling, homebuyer education, real estate development, real estate sales, mortgage origination, and loan servicing, as well as an in-house incentivized savings program.

For every 100 home purchasers, clients purchasing homes through Homewise have 6.3 fewer 30-day delinquencies, 2.3 fewer 60-day delinquencies, 1.8 fewer 90-day delinquencies, and 1.1 fewer 180-day delinquencies in the first two years of their mortgage than a matched comparison group of purchasers.

Read the full article on Homewise by Christina Plerhoples Stacy, Brett Theodos, and Bing Bai at Urban Institute