Amazon Employees Can Now Borrow Against Their Stock To Buy Homes

Amazon employees will soon be able to pledge company shares when purchasing a home, under a new deal with digital lender Better.com, according to WSJ. 

Better announced a new program for Amazon employees called “Equity Locker,” allowing them to use stock as collateral for a down payment without selling. Previously, Amazon employees had to sell their equity to purchase a home. 

“At Better, our mission is to make homeownership cheaper, faster and easier for all Americans.

“Today, we are very excited to announce that we have created Equity Unlocker to help Amazon employees unlock their equity, their homes and their futures,” Better CEO and founder Vishal Garg said in a statement. 

Equity Locker is open to current and former Amazon employees in Florida, New York, and Washington state.

Garg said the homeownership process is “opaque and stressful.” Homeownership is challenging for many people with student debt, maxed-out credit cards, and limited savings. He said many companies provide their employees with equity over cash, adding to this problem.

“The status quo is broken.

 “Even though equity is a valuable asset, it is considered ineligible by most banks and financial institutions when calculating the necessary down payment on a home,” Garg said.

Better said, Equity Unlocker is non-mark-to-market and non-recourse, meaning the loan terms aren’t impacted by stock market volatility.

To account for the risk of the Amazon stock price falling, Better is going to charge between 25 and 250 basis points over the market rate for mortgages, depending on how a person’s down payment is structured. 

Nick Taylor, head of real estate at Better, said: 

“What we then do is we look at that pledge and we value the equity at 50% of the current share price. We look at the date that an offer is made on the home and we calculate what the share price is for Amazon that day.” 

… and what does this remind us of? Well, the return of “creative financing.” 

Recall high-net-worth individuals leveraging their stocks for personal loans when interest rates were at the zero lower bound. And in some cases, that was a bad idea. 

Take, for example, John Foley, the co-founder and former CEO of Peloton, who pledged his stock as collateral for personal loans during the Covid stock mania. As soon as the Federal Reserve lifted rates last year, growth stocks crashed, and Foley was slapped with repeated margin calls by Goldman Sachs. 

Lenders accepting stock as collateral for purchasing a home isn’t exactly what the Fed wants to see while trying to cool the housing market.