Home Equity Protection (HEP) is an innovative product that makes it safer for people to invest in a home. It guarantees homeowners that if the housing market declines in the area where they live, they will be protected for part or all of that loss. By providing this protection, HEP also helps to attract and retain homeowners in neighborhoods where there is a concern that property values might go down.

HEP was made available in Syracuse on July 30, 2002, through Home Headquarters, Inc., a NeighborWorks organization, in partnership with the Syracuse Neighborhood Initiative; the Neighborhood Reinvestment Corporation; the Yale School of Management; Freddie Mac; Real Liquidity, LLC; HSBC; the Mortgage Risk Assessment Corporation; and a number of local partners. It has already demonstrated its appeal to homeowners with nearly 60 customers and $4 million of home value protected in its first year of operation. HEP has also received substantial attention in the local and national media, with coverage on NPR's "Marketplace" in Forbes magazine, and in The Economist.

Home equity is one of the largest components of household wealth in the United States and yet there is virtually no way for the average family to insure itself against drops in home value and the ensuing loss to the owner's equity. Much of U.S. housing policy in the past decade has focused on expanding home ownership opportunities to low and moderate income Americans, but relatively little has focused on helping protect them against the financial risk that home ownership entails. Given the recent public policy emphasis on assisting low and moderate-income families to build wealth, lack of equity protection is a significant public policy gap.

A home equity protection product will help to insulate local communities from eroding tax revenues and to build confidence in the potential for home ownership in urban neighborhoods which otherwise might be regarded as a risky bet for a homeowner's life savings. When choosing a neighborhood, homebuyers evaluate the cost of buying there, the amenities and quality of life offered by their prospective home and neighborhood, and the likelihood that they will make (or at least not lose) money when they go to resell their home. While there are many community development strategies that address the purchase price, amenities, and quality of life of a neighborhood, HEP is the only strategy that directly addresses investment concerns.

The following paper provides the structure of the pilot program in detail:

Home Equity Insurance: A Pilot Project
William N. Goetzmann, Andrew Caplin, Eric Hangen, Barry Nalebuff, Elisabeth Prentice, John Rodkin, Matthew I. Spiegel, and Tom Skinner

• William N. Goetzmann, Yale School of Management
• Barry Nalebuff, Yale School of Management
• Robert J. Shiller, Yale School of Management
• Matthew I. Spiegel, Yale School of Management

• Andrew Caplin, NYU Department of Economics

Collateral Damage: Refinancing Constraints and Regional Recessions
Journal of Money, Credit and Banking, Vol. 29, No. 4, Part 1, November 1997
Andrew Caplin , Charles Freeman and Joseph S.Tracy

The Behavior of Home Buyers in Boom and Post-Boom Markets
New England Economic Review (November/December, 1988)
Karl E. Case and Robert J. Shiller

Forecasting Prices and Excess Returns in the Housing Market
AREUEA Journal (1990) 18(3)
Karl E. Case and Robert J. Shiller

The Efficiency of the Market for Single Family Homes
American Economic Review (March 1989), 79(1)
Karl E. Case and Robert J. Shiller

Prices of Single-Family Homes Since 1970: New Indexes for Four Cities
New England Economic Review (September/October 1987)
Karl E. Case and Robert J. Shiller

Comparing Wealth Effects: The Stock Market Versus the Housing Market
Journal of Housing Research, Vol. 7 No. 2, 1996
Karl E. Case, Robert J. Shiller, and John M. Quigley

Mortgage Default Risk and Real Estate Prices: The Use of Index-Based Futures and Options in Real Estate
Karl E. Case, Robert J. Shiller, and Allan N. Weiss

Home Equity Insurance: A Pilot Project
William N. Goetzmann, Andrew Caplin, Eric Hangen, Barry Nalebuff, Elisabeth Prentice, John Rodkin, Matthew I. Spiegel, and Tom Skinner

A Spatial Model of Housing Returns and Neighborhood Substitutability
Journal OF Real Estate Finance and Economics, Vol. 14, Issue 1
William N. Goetzmann and Matthew I. Spiegel

Suburbs and Cities
William N. Goetzmann, Matthew I. Spiegel, and Susan M. Wachter

Clustering Methods for Real Estate Portfolios
Real Estate Economics, Fall 1995
William N. Goetzmann and Susan M. Wachter

Moral Hazard and Home Equity Conversion
Real Estate Economics, Vol. 28, No. 1, 2000
Robert J. Shiller and Allan N. Weiss

Evaluating Real Estate Valuation Systems
Journal of Real Estate Finance And Economics, Vol. 18, No. 2
Robert J. Shiller and Allan N. Weiss

Home Equity Insurance
Journal of Real Estate Finance and Economics, 19:1, 21-47, 1999
Robert J. Shiller and Allan N. Weiss

Housing Return And Construction Cycles
Real Estate Economics, Fall 1995
Matthew I. Spiegel

Karl Case and Robert Shiller have collected data sets on prices of houses. The dataset provides a sample of homes that sold twice between 1970 and 1986 in each of four cities: Atlanta, Chicago, Dallas, and Oakland. It includes the first sale price, second sale price, first sale date, and second sale date. This dataset is somewhat outdated, and of interest only to researchers.

• The official website of the Home Equity Protection project:
  http://www.equityhq.org/home.htm
• The Neighborhood Reinvestment Corporation site dedicated to the HEP project:
  http://www.nw.org/network/communityDev/homeEquity/index.html
• Articles related to the Home Equity Protection project:
  http://mba.yale.edu/news_events/CMS/Articles/741.htm
• The ICF Real Estate Initiative page:
  http://icf.som.yale.edu/real_estate.shtml