Company Background

In 2008, the real estate market, especially the housing market, had collapsed without any safety net. There was no guarantee for housing investment and lending was based on speculative assessments and demand.

There should be a system that guarantees that investment is based on accountability and public data, independent of speculative sources. That publicly disclosed data should be evaluated independently to determine the financial health of the entity based on specific pre-set information legally required including accounting and governmental guidelines.

Based on the above criteria, the concept of Rating Index, Inc. (RII) evolved. We started to conduct research from 2010 to 2013. During that time, we discovered the housing market, especially common interest properties (i.e. HOAs) were the most fragmented and unorganized entities. The fact is, to live in an HOA is the future for most residential communities. Mostly, they are clustered in the same neighborhood around the cities. The health of those individual clusters or groups could affect the living in such a city and also will affect the economic evaluation for a specific geographic area.

Each year, the banking system and the governmental authorities add new laws and regulations as to how such an HOA or community should govern themselves and conduct their business. While on the surface everything may look fine, the reality does not reflect the true economics of those communities or organizations. Most of them are underfunded with huge deficits and lack the funds for repair and maintenance of their structures. Also, the reserve funds do not meet the appropriate thresholds.

The banking industry continues to fund loans and mortgages for those homes and condominiums without any method to certify the financial stability of those organizations and HOAs. Even the buyers who are buying into those communities do not have a clear picture of what kind of financial stability they are buying into.

Often the previous sellers sold their homes with a healthy margin of equity leaving behind a huge deficit that was accumulated as a result of lack of repair. This deficit then becomes the liability of the new buyer and continues to grow with each generation of buyers. This financial liability varies between one organization and another.

An independent rating system is needed to regulate the practices of those entities without jeopardizing their independence. In fact, by doing so and creating such ratings, the financiers of those mortgages and the investor/homeowners will have a clear picture of what they are investing into and that investment would not carry a deficit which would jeopardize the stability of the ownership and mortgage holders. The Rating Index system is not only important in this case, but essential for the survival of this industry.