There are many examples of individuals who currently own homes, and have some equity, but are in subprime mortgages that have reset upwards.  These individuals can make use of that equity to lower their payment while still providing a reasonably safe return for the investor. 

Assume they originally purchased a $230,000 home that is now worth $200,000. When they initially purchased, they put $40,000 down.  This means that these homeowners have $10,000 in equity. Their note has just adjusted up from 8.5% to 10%, so their P&I payment has just risen from $1,461 to $1,667. They can no longer afford the payment and, with the current market, selling the home is not an option. They are a foreclosure waiting to happen with traditional financing tools.

If they refinance into Term Ownership for a 5 year term, though, their monthly P&I payment would drop from $1,667 to $1,008 per month, a nearly 40% drop. Their home is, once again, affordable. Over the course of 5 years, assuming the rate in their note would remain constant, the homeowner would save about $39,500 in payments.

How does the investor profit?

But what about for the investor?  The investor would invest 70% plus the closing costs for the refinance.  Assuming that averages 73%, the investment price is $146,000 (73% of the $200,000 current fair market value).  Over 5 years, the property while it might temporarily fluctuate, it should be worth at least the $200,000 that exist today as the fair market value.  If it is only worth $200,000, at the end of the term, the property will likely pass by operation of law to the investor, or the Term Buyer may renegotiate a term purchase (paying $60,000 to the Term Investor).  With no appreciation to split with the homeowner, the internal rate of return would be a respectable 6.497%

What if Five Years does not Seem Safe Enough?

The purpose of an investment is to make money.  If five years does not seem safe enough for your purposes (i.e. you fear the overal housing trend will be lower after five years) then you can choose to structure the term for a longer period.  With a ten year structure, The Term Investor would contribute 45% of the current fair market value plus an estimated 3% for closing costs.  In this case, the upfront investment would be $96,000.  On the ten year, again assuming the home is still only worth $200,000, the IRR for the investor is 7.616%