A Return to Peer-to-Peer’s Roots

By Georgina McCreadie on Thursday 30 April 2015

Alternative Lending

A new family funded reverse mortgage has just been launched by a platform, known as the “Caregiver” loan.

This allows any number of children and grandchildren to pool resources to provide a flexible line of credit at interest rates far below what commercial reverse mortgage lenders charge and with less hassle. For its reverse mortgages National Family charges a flat fee of $2,500.

National Family Mortgage is a platform that has helped facilitate and service nearly $290 million in intrafamily home loans in recent years. It is typically used for parents helping children to buy first homes. Timothy Burke, founder and CEO, says the “Caregiver” concept comes in response to requests by existing clients to come up with a plan that helps with the financial needs of the post-retirement years.

National Family Mortgage does not loan money itself, instead it helps structure and customize lending arrangements among relatives- documentation, accounting, recordation, closing and servicing for home loans made by relatives who wish to “keep the money in the family”. The loan documents structured by National Family make provisions for such eventualities as family members falling out or suddenly having an inability to pay. It is recommended that total loan commitments do not exceed 65% of current home value.

There have been many reports over recent months that bemoan how peer-to-peer lending is losing its true nature. This has been seen in many platforms rebranding their activity to marketplace lending which takes into account the fact that most of the capital on the platform is sourced from institutional investors rather than from retails investors. This is a trend we’ve seen particularly in the US where for the biggest platforms, up to 80% of the lending can be institutionally driven. This has necessitated the launch of platforms like Lending Robot who are looking to level the field for retail investors. Retail investors are left at a huge disadvantage when trying to invest on platforms like Prosper and Lending Club as they are competing against hugely sophisticated investors who expend a lot of time and capital cherry picking on these platforms.

National Family Mortgage could be seen as bringing peer-to-peer lending back to its roots. And the idea of a Caregiver loan is perhaps one we will see more platforms using as it could be a great alternative for families who are facing rising care costs for elderly relatives. 

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