No one is immune to defaults

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No one is immune to defaults

 No One Immune To Defaults.jpg

 

When we say we have a proven track record, we can stand behind our claim with results to our investors. What does a proven track record mean to you?

Is it a real estate investment firm that communicates with investors the good, the bad and the ugly of a default scenario as the situation unfolds? Does it mean a real estate investment firm that handles defaults in the most prudent way possible to protect the asset and the investor’s capital investment? Does it mean a real estate investment firm that does not do an investor capital call for the expenses to take back the property, but instead puts their own capital on the line for an investment they have no ownership in?

Defaults are always a possibility for anyone who is a lender on real estate. It’s how you handle the default situation that determines your results. When you invest in real estate, you go into the investment knowing that there is a risk that the borrower may not make their payment. Ignite Funding, as the Loan Servicer of your investments, monitors the monthly payments made by the borrowers. In most instances the borrowers make their payments on or before the first of each month or within the 10-day grace period. By the 5th of the month Ignite Funding engages borrowers when payments are not made to get an understanding of intent and/or reasoning. Ignite Funding communicates to our investors when the 10-day grace period has been exhausted and no payment was made. Within the following 10 business days we are determining through ongoing communications with the borrower the best course of action. Each situation is different and must be handled based on all variables being examined. Some situations can be rectified in short order while others require in- depth communication to determine the best course of action (loan modification, loan forbearance, foreclosure proceedings or Deed in Lieu). The Default Guidebook further defines the course of actions in more detail.

A default situation is not however a time to make a rash decision that could affect the value of the real estate asset or how long an investor will not have access to their capital. If we rush to foreclose on a property when a borrower is seeking traditional financing to pay off a loan, we could be making a decision that could have a negative cause and effect. Instead a loan forbearance of 30-days may lead to a payoff.  Another scenario is a borrower informing Ignite Funding that they will not be making payments on any of their loans moving forward as they have elected to change their business model. The next step with the borrower must be handled with precision to ensure the protection of the real estate assets. These scenarios are real and is what Ignite Funding is managing on your behalf with the borrowers. You can trust that Ignite is doing everything possible as your Loan Servicer. We do not get paid for our services when you are not earning income, so our interests are very much aligned and we are equipped to handle these situations with the best possible outcome for our investors in mind.

Let’s go back for a minute to the borrower that informed us that they elected to stop making further payments to our investors on all their loans  due to a business model change. The magnitude of this situation affected nearly $19 million of investor capital at Ignite Funding. Evaluating a situation of this magnitude unfortunately takes time to determine the best course of action. This is not something an investor wants to hear, but returning 100% of their capital is. Ignite Funding needed to evaluate the situation by reviewing the nearly 26 acres of land and 374 residential lots to determine factors that included, but were not limited to;

  • the current value of the real estate assets “as is” and “if improved”,
  • current market conditions where the properties where located,
  • potential buyers and timeframe of purchase to determine if a Deed in Lieu is a viable option for some assets,
  • determining the benefits of the information for properties where the current borrower may be able to provide intrinsic value based on work completed (surveys, bonds, etc.),
  • costs associated in taking back these properties through foreclosure versus Deed in Lieu, and ongoing negotiations with an untrustworthy borrower to determine if we would allow the borrower to walk away with no liability to the situation thus reducing the costs to the investors to take back the properties.

Now let’s go back to where we started. What does a proven track record mean to you?

Is it a real estate investment firm that communicates with investors the good, the bad and the ugly of a default scenario as the situation unfolds? YES. Ignite Funding provides informative information to its investors. It may not be what you want to hear, but it is always the truth.

Does it mean a real estate investment firm that handles defaults in the most prudent way possible to protect the asset and the investor’s capital investment? YES. Ignite Funding returned 100% of the investor capital as it relates to this situation. Not only did we return 100% of the investor capital, investors earned interest during the time the borrower was making payments and in some cases a capital gain upon the sale of the property.

Does it mean a real estate investment firm that does not do an investor capital call for the expenses to take back the property, but instead puts their own capital on the line for an investment they have no ownership in? YES.  Ignite Funding spent $180,000 on behalf of its investors to take back the properties related to this situation that was reimbursed upon final disposition of each property.

Mitigating risks when investing in real estate means working with a reliable real estate investment firm that has your best possible outcome in mind. That is what you get when you invest in real estate with Ignite Funding.
By Ignite Funding on Oct 4, 2017 1:06:27 PM | | Blog | 0 Comments

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