Startup Distributes $150,000 In Emergency Grants From Acumen Fund To Homeowners

Some 35% of Americans report missing a mortgage payment due to the pandemic and more than 50% are cutting back on essential expenses to afford to make their mortgage payment, according to the National Realtors Association.

With that in mind, impact investor Acumen Fund recently tapped fintech startup EarnUp to distribute $150,000 in emergency funds to homeowners struggling to make ends meet in the current crisis.

EarnUp’s platform automates the process of paying a mortgage, letting borrowers schedule payments when they’re most likely to have the money and change that schedule if they have a few more days to go until payday. Launched in 2013, the company manages more than $10 billion of loans on its platform.

Half a Mortgage Payment

EarnUp started distributing the grants earlier this month, focusing on over 1,000 customers who have entered into forbearance or show other indications of having difficulty making their payments. The company is contacting customers by phone, email and via the web site, as well as through the app and releasing the funds directly to the mortgage lender or servicer.

According to co-founder Nadim Homsany, Acumen was looking for a way to distribute funds to low-income people struggling to meet their bills in the current environment. Already an investor in EarnUp, Acumen figured the company was a good candidate to be that conduit. “Our platform helps us develop a direct, trusted relationship with our customers,” he says. “Acumen asked us if we could distribute $150,000 to customers who needed it most, and we told them we could.”

The money will pay for about half of selected customers’ payments for one month. According to Homsany, mortgages typically are $800 to $1,000 monthly.

Paying When You Get Paid

Homsany started the business after a varied career in engineering, law and private equity. According to Homsany, he and co-founder Matthew Cooper came up with the idea after Homsany bought first house in 2011. He had tried to make extra principal payments, only to find, six months later, that the mortgage servicer had posted that money for future interest payments. At first glance, he suspected underhanded motives. But then, after he and Cooper talked, he realized it was simply the way the system worked.

What was needed, the co-founders decided, was a way to create a better and more user-friendly system for paying loans, especially for people living paycheck to paycheck—that’s more than half of all Americans—who might struggle to make their mortgage payments.

The concept: Allow homeowners to pay when they get paid, rather than wait for the first of the month or whatever arbitrary due date might be set under normal circumstances. In addition, the platform would make automatic payments, “So borrowers don’t even have to think about it,” he says.

A Pause

How does it work? After customers deposit their paychecks into their bank account, the money is automatically withdrawn and sent to the mortgage company or servicer. The platform also allows them to make additional payment on the principal, should they so choose.

In addition, users can go into the app, hit “pause” and change the dates of payments. That’s an especially useful feature for people whose income is erratic. “If you need to make a payment a few days later than usual, systems usually aren’t capable of accommodating that,” says Homsany.

According to Homsany, the platform’s users have reduced their overall delinquency rate by around 20%.

Change in Distribution

The company’s current distribution method is different from the one it used initially. At first, it sold directly to homeowners; now new sales target mortgage lenders and servicers, which, in turn, offer the product to borrowers, usually for free.

According to Homsany, the company introduced that model into the mix around 2016, when they realized that companies also benefited from the service. Analysis of consumer data allows EarnUp to develop insights into users’ financial health, thereby allowing the enterprise customer to help borrowers get ahead of the curve, especially if there are signs their financial situation is shaky. “If you’re a mortgage company, you typically don’t know that a consumer is likely to miss a loan payment until it actually happens,” says Homsany.

Another useful insight: Whether homeowners don’t have enough money to make their payment. In that case, the system automatically pauses the deduction from the borrower’s account. Then the mortgage company can contact the customer and figure out a better time to schedule a payment.

As for helping out with other grants, Homsany is eager to lend a hand. “We’d like to help as many people as we can,” he says.

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