The yield on the 10-year is 2.25%. They clearly think that either they’ll earn a higher return or it’s lower risk than a 10-year treasury. I wonder what their modeling for it is in terms of percent appreciation and default risk. If the owner stops paying the primary mortgage, then they are in a crappy position similar to any other secondary mortgage.
They must do something in the contract to make refinancing difficult. If not, then it’d be really easy for the home owner to refinance to pay them off and pay 0% interest to get 10 years of free money.