Each contract gives NatEquity the right at maturity to purchase one half of each home. NatEquity pays one half of the home’s current value in the form of monthly payments, advances for home improvement and a settlement payment at maturity. In exchange the homeowner receives current monthly payments, support in maintaining their home and the unpledged portion of the home’s future sale’s price is protected for their heirs when the home is sold. The homeowner also receives a settlement payment when the home is sold. NatEquity caps its share of cumulative compound share of HPA at 4%, in exchange for investor downside protections. Any actual adjustment to the settlement payment is determined based upon the home’s sales price. If actual value at sale is less than the target 4% HPA, one half of NatEquity’s HPA shortfall is deducted from the settlement payment, but this settlement payment never falls below zero. Capping NatEquity’s share of HPA at 4% in a 6% HPA market and tying advances to home improvement strengthens lender collateral and adds incentive for homeowners to participate in maintaining their home’s value. Retained servicing assures continued property maintenance. Each contract is secured by a mortgage, and deed of trust.
The example below is for a typical single-family home with a fair market value of $1,250,000 and provides $2,500 per month cash payment. The NatEquity contract is a balance of income certainty for homeowners and certainty of inheritance for heirs. Two charts follow showing examples of a sale after year 3 and year 10.