Amazon agrees with Better.com: opening a mortgage with shares is now possible

Anyone who has taken out a mortgage knows what the obstacles may be, the guarantees to present, the evaluations to be made. Very often it is necessary to resort to a relative who acts as guarantor. This will no longer be the case for Amazon employees. It will be enough to use the same shares of the company as collateral as collateral. The signing of the agreement between the e-commerce company founded by Jeff Bezos and the online financial company Better.com changes the mortgage register in the United States. For the first time, with the new “Equity Unlocker” service, two seemingly distant worlds are connected, stock securities and home mortgages. And it is possible that other realities will follow suit.

In a historical phase in which interest rates are destined to continue to rise, finance is becoming ever more creative. Now the dream of owning a home is taking on a new form. As reported by the Wall Street Journal, Better.com’s new product will allow Amazon employees to pledge shares in the company they hold for mortgage financing or to put down a home purchase. Solution that is good for both players in the field. Amazon employees no longer have to sell stock to raise cash. And Better.com can have a smooth cash flow. To protect against a fall in Amazon’s stock price, Better.com will charge a higher rate on stock-pledging employee mortgages, between 0.25 and 2.5 percentage points above the market rate, depending on how structured the down payment, the company explained in a note. According to Better.com CEO Vishal Garg, customers who choose this mortgage option would still be protected from downward fluctuations in Amazon shares.

The plan, which does not include any financial settlements between the companies, is designed to give flexibility to workers who are largely paid with shares in the same company. Historically, as the WSJ recalls, Amazon has paid less cash compensation to employees than other players in the Big Tech sector and has tried to make up the difference with the assignment of share packages with advanced maturities over time. In other words, a tool for retaining one’s staff, who thus stay longer in the company and are encouraged to do better and better, since the share performance can be dependent on the company performance.

The underlying concept is simple, as the New York newspaper points out. Amazon is guiding its employees to “think like owners” and hold shares longer to experience a nominal price increase, according to spokesperson statements and internal training documents viewed by the Wall Street Journal. Not only loyalty, therefore, but also empowerment of one’s workforce. The problem, in such an uncertain macroeconomic scenario and with a monetary policy still far from having stabilized the flare-ups of inflation, could be represented by future expectations.

Should inflation prove to be more persistent than expected, then a contraction of credit channels could occur. Not exactly a credit crunch, but a decline that also reduces the liquidity available for buying homes in the United States. And which therefore could also affect all related industries, depressing the domestic economy. A scenario that would lead the US to experience a possible recession, if combined with the extremely fragile geopolitical framework.

If on a financial level a solution such as the one proposed by the “Equity unlocker” program represents an interesting possibility for Amazon employees, on the other it can represent a transfer of risk into the hands of a third company. Market volatility can only be partially mitigated by the progressive increase in the mortgage payment, while the positions taken can make the use of the share as collateral less attractive for the customer. After all, if we look at the performance of the Amazon stock on Wall Street compared to exactly one year ago, we can observe a contraction of 35.8 percent. The idea of ​​Better.com and the Seattle giant seems positive, but the market will give its final judgment. With the hope that further imbalances will not be created in a world where critical issues – systemic and otherwise – increase month after month.