Lender Launches ‘Caregiver Loan’ as New Reverse Mortgage Alternative

A Massachusetts-based peer-to-peer lender sees a huge market opportunity in rolling out a new family-funded, low cost alternative to traditional reverse mortgages.

The Caregiver Mortgage is the latest product offering from Boston-based National Family Mortgage, a company that provides online lending services between family members. The company specializes in helping parents and their adult children—as well as other family members—property structure, document and register mortgage loans.  

While National Family Mortgage has traditionally structured loans that enable parents to help their adult children purchase their first homes, as a result of growing demand from existing clients, the company is now providing the inverse of that via the Caregiver Mortgage starting May 1.

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And the new product stands to rival the traditional reverse mortgage in more ways than one.

“There is a perception out there that reverse mortgages are not the most consumer-friendly product in general,” National Family Mortgage CEO Tim Burke tells RMD. “There’s also a perception that some folks feel like they aren’t necessarily getting the benefit they deserve based on the equity in their home.”

Many of National Family Mortgage’s clients have explored the prospects of getting traditional reverse mortgages, but were “turned off,” Burke says, by origination fees, relatively high interest rates, mandatory annual insurance premiums, and the fact that the lender or the bank is building equity in the house and not the family.

Enter the Caregiver Mortgage: an inter-family loan boasting a low interest rate jointly chosen by the lender and borrower, no insurance premium, no age restriction, no counseling requirement or primary residence restriction, and above all, keeps the house within the family. There is, however, a one-time set up fee of $2,500 for National Family’s services.

The loan also offers greater flexibility of disbursements than traditional reverse mortgages, by allowing family lenders and borrowers to send and receive disbursements whenever they want for the life of the loan.

Families who decide to use the Caregiver Mortgage have access to a management platform developed by National Family Mortgage, which lets them keep track of the collective disbursement they decide to lend mom or dad, as well as their individual disbursement activity.

Depending on a person’s particular financial means, family members on the lending side of the Caregiver Mortgage can negotiate amongst each other how much they will disburse to their borrowing parent. For example, that means one person can choose to give $1,000 a month toward the loan, while another can give $500, or however much they decide.

“Some families out there might have the means to help out, but don’t have the means to necessarily gift it,” Burke says. “They want to formally structure that assistance.”

Because in some states various laws require either an attorney or title company must handle the notarization and registration of the mortgage document, National Family Mortgage works in partnership with local attorneys and closing agents, which collect the initial funds and disburse them to the borrower.

Family members are repaid pending their decision on what to do with the property in the event of their parent’s death, whether that means choosing to liquidate the home by selling it or assuming an ownership share of the residence.

Since National Family Mortgage launched in fall 2010, the company has funded approximately $286.3 million in forward loan volume to date. And based on the inquiries coming from existing clients, the company sees the market opportunity for the new Caregiver Mortgage being significantly higher than its current product line.

“Obviously, it’s not for everyone,” Burke says. “Not everyone is in a fortunate enough position where the adult kids can afford to offer a credit line to their parents, but there are families out there who do have the means.”

Written by Jason Oliva

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  • Wonder how the Mass Division of Banks views this as all reverse mortgages products have to be approved through the division. If this company wants to excel at reverse their first step would be getting out of Massachusetts.

  • This is not exactly a new idea. Per John Yedinak, Virgin Money an affiliate within the Virgin Group headed up by Richard Branson presented this concept six and a half years ago. Please see —http://reversemortgagedaily.com/2008/09/11/virgin-money-president-talks-about-reverse-mortgage-alternative/ — where John presents a summary of the Virgin Money version of the program.

    While some may feel this is a great idea, one must understand that such transactions can result in losses to all participants except the facilitator. Then there is the problem of family members who did not participate concluding that the other family members are getting too much interest and are doing them harm.

    Then there is problems with cash flow. If the family members funding the loan suddenly have cash flow problems, the parents may have to turn to the commercial reverse mortgage market where principal limits could be low due to rising interest rates so that available proceeds cannot even payoff the existing lien.

    The potential problems are so great that unless there is a true deep pockets family member who is willing to fund whatever is needed, the risk is not worth what it is that the participants think they are gaining.

  • I love this idea- There are and will be many borrowers that fall through the cracks of our Reverse Mortgage guidelines and it’s not getting any easier. Borrowers that we would have given a loan to in the past, no longer qualify. And maybe it just doesn’t make sense to put a Reverse Mortgage in place, this is a fantastic alternative. You have an arena of family members watching and often wanting to help. Collectively now they can. My only caution is that it makes sense, the $2500. initial set up fee (I understand why they do it) and cost of an Attorney and recording fees (I am going to assume the lending family members will be placed on the deed?) can be as costly as a Reverse Mortgage initially. This loan has to make sense to proceed and counseling prior is a good idea. Having your personal eldercare or estate planning attorney is also a good idea. Overall, after being in this business as long as I have- Anything that helps our eldest citizens is a welcome addition as long as it is vetted out properly.

    • Nancy,

      It is OK to dream but this should be attempted by the few. The complications, family backlashes, money problems of the funding members, death or other loss of the funding members, and potential loss to all participants takes away much of the luster of this concept.

      Whenever possible, having an insured third party as the lender is a much wiser course of action.

    • nrpedone,

      Reading that family members would be put on title is one of the worst ideas yet. That means that those family members share in on profit from the sale of the property. It also means that the senior has lost total control the property in fact depending on the percentages owned, the senior may have no say over the use or sale of the property.

      I would assume that the lending family members would have their names on the mortgage documents including a trust deed in those states where it is available.

      Maybe you can explain the advantages to the parents of having family members on title.

      • Excellent point. What if one person on title gets sued? Yikes!

  • I have to study it more but I see many problems that can occur, especially related to family member disputes and potential losses to them.

    I would be leery about the program. We feel the reverse mortgage is getting complicated, this program can really confuse everyone, once getting involved with it.

    Sure there are benefits to the program over a reverse mortgage, such as the fees, no counseling etc. However, I will put my money on the reverse mortgage!

    John A. Smaldone

  • Interesting commenting relatively high rates and fees for reverse mortgages – most lenders offer rates as low as 3.50 variable *that includes MI), and some lenders provide significant credits. Yet Family Lending has a set up fee of $2500. Hmmm.

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