[00:00:00] Speaker A: Welcome, listeners. You're listening to the Deeds in the Desert, where real estate investors tune in for the latest news.
Welcome to Deeds in the Desert. This episode's going to be a little bit different.
It's probably what you're thinking, but you're just not asking the questions. So I'm going to ask them for you. And I'm joined by Misty Bethany, who's going to help us answer those questions. Welcome, Misty. Thanks for joining us.
[00:00:29] Speaker B: Thank you for having me.
[00:00:30] Speaker A: Okay, this one's going to be a little bit different. Okay, so these are all the things that investors are probably thinking, because it's natural that we would think these things, but maybe they're not asking the questions. Or maybe we've heard these questions time and time again.
[00:00:45] Speaker B: Right.
[00:00:45] Speaker A: And, you know, some are willing to ask, and some are just like.
[00:00:49] Speaker B: Yeah, I'm just going to. Translation.
[00:00:51] Speaker A: Exactly.
And so I want to start by asking you a few questions, and we're just going to have some active dialogue about it. Okay, first question.
So what kind of due diligence does ignite funding do before funding a loan? Okay, nobody's gonna ask that specific question.
So here's what we think. Well, here's what we think they're thinking.
[00:01:12] Speaker B: Yep.
[00:01:13] Speaker A: So what they're really wanting to ask is, how do I know that you've done your homework?
[00:01:21] Speaker B: Why should she Better than I can. Yep.
[00:01:24] Speaker A: So what. What are you doing that's better than I can? First, let's start with this. Are our investors real estate analysts?
[00:01:38] Speaker B: Very few.
[00:01:38] Speaker A: Very few.
[00:01:39] Speaker B: There are some.
[00:01:40] Speaker A: There are some. Right. And so for the some that.
[00:01:44] Speaker B: But that's not who's asking the question.
[00:01:45] Speaker A: This is true for the some that aren't.
[00:01:47] Speaker B: Yes.
[00:01:49] Speaker A: Can I trust you that you're doing your job?
[00:01:51] Speaker B: Yeah.
And they want to know that, too, because they don't necessarily know what they should be asking, but they want to feel as if they're doing their own due diligence. And yes, you definitely should be doing your own due diligence in terms of asking those questions when you start with any company like Ignite Funding.
So what do we do for due diligence? Well, the same thing a bank does. Right.
The emphasis may be here and there, different in some cases. And Pat's done a lot of podcasts on that subject, but we're looking at credit, we're looking at appraisal values, bpo, broker, price opinion, we're looking at the borrower's financials, we're looking at all of those things, and we make those available to the Investors, too. So if you go on a loan, before that loan closes, we're going to send you all those documents.
But great question to ask. You know, you want to know that we have done our homework before ever underwriting a loan for a borrower or a property.
[00:02:54] Speaker A: Yeah, absolutely. And there's, there's so much that goes on behind the scenes when we analyze loans, markets, borrowers, asset types, asset classes.
[00:03:05] Speaker B: So much more than the documents say, oh, absolutely.
[00:03:08] Speaker A: It goes above and beyond that.
But, but here's the reality of it. If we don't do those things, those investors aren't coming back to us.
[00:03:19] Speaker B: Right. There's no, there's no good that will come to us if we don't do our homework and our due diligence.
[00:03:25] Speaker A: Yeah. You know, just recently, about a week ago, we launched a loan repository on the client portal.
[00:03:32] Speaker B: Yes, we did.
[00:03:33] Speaker A: And I kind of laugh a little bit at this because I asked in our most recent meeting, hey, have you guys heard from many investors? How do they like it? And you guys are like crickets.
[00:03:43] Speaker B: Right.
[00:03:44] Speaker A: And so I think a lot of times what ends up happening is integrity and trust is built over periods of time. And investors are now like, oh, I like that loan because it's in this location. I like that loan because I've had six loans with that borrower. I like that loan because.
[00:04:00] Speaker B: Right.
[00:04:01] Speaker A: So they start to lean on that integrity and that trust.
Maybe more so than they do on. Are they doing their homework because, you know, they know we're doing our job because of the quality of our investment.
[00:04:14] Speaker B: That's right.
[00:04:15] Speaker A: But. But they're thinking it. They're definitely thinking, especially as they're newer. Yeah. And probably the group that's analyzing real estate, maybe as a hobby, maybe as a professional attribute to, you know.
[00:04:28] Speaker B: Yeah.
[00:04:28] Speaker A: The, the plethora of knowledge that they have, those are probably our biggest critics.
[00:04:34] Speaker B: They can be, for sure.
[00:04:35] Speaker A: Right.
[00:04:36] Speaker B: Yeah.
[00:04:36] Speaker A: And so they may look at things a little bit differently.
Talk to me a little bit about the critics.
Like, how are they questioning our abilities? How are they challenging us a little bit.
[00:04:50] Speaker B: Yeah.
[00:04:51] Speaker A: Where we're like, oh, okay, let me get you that information. And then do we provide it?
[00:04:55] Speaker B: We do provide it. So a lot of it comes down to a lot of the criticism comes from loan to value. Right.
[00:05:01] Speaker A: Yeah.
[00:05:02] Speaker B: So we do not, although we do our own due diligence and our director of underwriting does his own valuation of a project, we do not shop BPOs, and we do not use his opinion. So we do get a third party.
We don't Shop that. So sometimes that appraisal or the BPO will come in with a different value than what we believe it to be. It doesn't necessarily stop us from doing the loan. If we believe all other factors are good, it may have a higher loan to value than what they want to see, you know, as they're analyzing for their own due diligence.
And so that we get a lot of pushback in that regard.
[00:05:40] Speaker A: Yeah, well, LTV is actually the next topic that I'm going to bring up, loan to value.
And here's the question that we maybe are how we would phrase it. So how do you determine loan to value and why does it matter to investors?
And then what really is going into their minds is if this fails.
[00:06:02] Speaker B: Right.
[00:06:02] Speaker A: How much room is there before I start losing money?
[00:06:05] Speaker B: Absolutely.
[00:06:06] Speaker A: So, you know, we were talking to Pat the other day, we had our investment review committee, and one of the questions that, you know, I ask maybe frequently is we do get third party opinions of value.
And the reason behind and why we do that is probably not what investors think.
[00:06:26] Speaker B: Yeah.
[00:06:27] Speaker A: So when we're looking at, you know, third party evaluations, we're doing it for a couple different reasons. We're doing it for exit strategy. Yeah, right. We're doing it for, you know, a checks and balance for our internal review.
[00:06:41] Speaker B: That's right.
[00:06:41] Speaker A: We're doing it because we want to make sure that there is reduce risk in knowing that there are others out there that can compare the value of that asset to others that maybe they've sold in the past.
So what? Give me an idea. This ltv, the loan to value for third party, the loan to value internally. And is it really enough if it goes into default for me to still get all my money back? Like, talk to me about those couple different segments. First, why are we getting third party?
[00:07:17] Speaker B: Well, we do that because although, you know, Pat will go in and he'll have an idea of the value, we want to have a third party independent valuation. Because honestly, like you said, it's checking a box and it's show. It's also giving investors confidence that somebody besides Ignite Funding has given a value to this property.
So that's, that's the main reason, I believe. But at the end of the day, it's an opinion of value, whether it be an appraisal or a bpo, it's an opinion of value, just like Pat's is an opinion of value.
So when you look at it in that terms, we really, for every loan, more or less, we have two opinions of Value.
[00:08:01] Speaker A: We do.
[00:08:01] Speaker B: One that's disclosed and one that's not ours is not necessarily disclosed. But the fact that we're doing the loan tells you that we believe that the value is there. That should something go wrong with the property, there is enough in that property to be able to make our investors whole.
[00:08:19] Speaker A: Yeah.
But there are times where it's not.
[00:08:24] Speaker B: There are times sometimes because markets are uncon. You know, we can't control the markets there.
[00:08:30] Speaker A: There are a lot of unknowns. And I. I've done this before, and I know that this probably is not a popular comment of mine, but, you know, real estate is like an antique.
[00:08:40] Speaker B: Yep.
[00:08:41] Speaker A: There are moments in time where, you know, you're searching for a buyer.
[00:08:47] Speaker B: That's right.
[00:08:47] Speaker A: Of something that you think when you underwrite it, you know, the needs there supply, demand, like we're checking our boxes. Market conditions are driving that asset class. All of the. Everything lines up.
[00:09:00] Speaker B: Yep.
[00:09:01] Speaker A: But two years later, you know, our crystal ball is only so good.
[00:09:07] Speaker B: That's right.
[00:09:08] Speaker A: It's only so good. So we have to base it off of the as is value.
[00:09:13] Speaker B: That's right.
[00:09:14] Speaker A: When we underwrite that loan.
And that's something that I just want to make sure I get across to everybody, that there's risk in every investment and there's risk in real estate, even if we have a loan to value. And our internal loan to value ratios are always somewhere between 60 and 75%.
[00:09:31] Speaker B: Yep.
[00:09:32] Speaker A: So you would think in every transaction, 25% minimum should be enough to get everything returned.
[00:09:38] Speaker B: You would think.
But that's not how they were. Not always the case.
[00:09:43] Speaker A: That's right. Every single project is different and has to be treated as such. So in our perfect world, which we have a pretty good track record, we are able to underwrite.
[00:09:56] Speaker B: That's right.
[00:09:57] Speaker A: Service pay off with very little issues in between.
[00:10:01] Speaker B: Very few. But you hit the nail on the head. It's timing. Right. So we can't predict an exact pinpoint that that asset would need to be sold and at what value somebody would be willing to buy it.
[00:10:13] Speaker A: Mm.
[00:10:14] Speaker B: And. And the very next day, they could be willing to pay three times as much for it.
[00:10:19] Speaker A: Yeah.
[00:10:19] Speaker B: You know, I mean, we. You just don't know. Nobody does.
[00:10:22] Speaker A: Nobody does. Okay. Are these loans personally guaranteed by the borrower or backed solely by the real estate? This is a question that we are asking.
But here's what our investors are thinking. Is someone else besides me on the hook if this goes bad?
[00:10:41] Speaker B: Yeah.
[00:10:42] Speaker A: Is there someone else on the hook?
[00:10:43] Speaker B: Well, in a lot of cases. So we often have personal guarantees from borrowers on the loans.
And you know, that's great. And it really only is going to come into play if the loan goes into a default situation and there's a loss.
[00:10:58] Speaker A: Yeah.
[00:10:59] Speaker B: So we hope that that never happens, obviously. And we do everything we can within our control to make sure it doesn't. But if there is a loss, there are some loans and we disclose it from the very beginning where the borrower has put a personal guarantee on the property. And in that case we can absolutely seek a judgment against the borrower for any deficiency, should there be one. But if there is no deficiency, in other words, there's enough equity there to make investors whole. It's not going to come into play.
[00:11:33] Speaker A: Yeah. So there's a couple things.
[00:11:35] Speaker B: It's a little extra insurance and that's how investors view it.
[00:11:39] Speaker A: It is. And I think the way that we view it is probably important for investors to understand.
[00:11:44] Speaker B: Yeah.
[00:11:45] Speaker A: If there is opportunity for us to mitigate risk or to collateralize more, whether that be with assets or personal guarantees, we're going to go after and get as much as we possibly can at the onset of that loan.
[00:12:00] Speaker B: Absolutely.
[00:12:01] Speaker A: And so we're always going to approach the subject of a personal guarantee, whether it be limited, full business, whatever we can get, whatever extra. Yeah. It's, it's a, it's a means of saying to the investor, you know, before you take out a loan with us, before we offer this to our investors, we want to know how serious you really are.
[00:12:23] Speaker B: That's right.
[00:12:25] Speaker A: And although we're asset based lenders, we still want our borrowers to have skin in the game.
[00:12:32] Speaker B: Absolutely.
[00:12:33] Speaker A: Whether that be capital, whether that be signing that document.
[00:12:38] Speaker B: Shows confidence, Right?
[00:12:39] Speaker A: Exactly. Exactly. So whatever we can capture on the onset, we're going to do.
But then there's a flip side.
[00:12:48] Speaker B: There is.
[00:12:48] Speaker A: You talked about getting a judgment.
[00:12:50] Speaker B: Yep.
[00:12:52] Speaker A: First of all, getting a judgment is costly.
[00:12:55] Speaker B: Well, it involves the courts.
[00:12:57] Speaker A: It does.
And you know, I know there comes a time where your net worth exceeds a certain amount.
[00:13:08] Speaker B: Yeah.
[00:13:08] Speaker A: And you do everything within your powers to protect. To protect it.
[00:13:13] Speaker B: That's right.
[00:13:13] Speaker A: And that could include offshore accounts. That could include hiding it inside of other llc. That could. So many variables. Right. And so many unknown variables to us.
[00:13:25] Speaker B: Yes.
[00:13:26] Speaker A: And within the duration of that loan, that financial landscape of that borrower could change drastically.
[00:13:33] Speaker B: And in that case, it probably has.
[00:13:36] Speaker A: Yes.
So talk to me about have we ever gotten a judgment first and then have we ever been able to, most importantly, collect on it, should there be a deficiency?
[00:13:50] Speaker B: Great question. Because like you said, first step. Well, first thing is there has to be deficiency. Then they're seeking the judgment to go after the borrower's guarantee, which takes some time and money.
[00:14:02] Speaker A: Yes.
[00:14:03] Speaker B: And then collectability.
And we have to as a company weigh whether the collectability is there to warrant.
[00:14:11] Speaker A: Yes.
[00:14:12] Speaker B: Spending the funds to go after a judgment.
[00:14:14] Speaker A: And when there is an opportunity that warrants maybe if I can, if I can get that those legal costs down as tight as possible, that warrants it. But as far as actually collecting.
Never.
But I will say that we have utilized that personal guarantee or limited personal guarantee to leverage.
[00:14:42] Speaker B: That's right.
[00:14:43] Speaker A: The collectibility.
[00:14:44] Speaker B: Absolutely.
[00:14:45] Speaker A: Of the capital to our investors.
And hopefully there's not too many borrowers watching this.
[00:14:52] Speaker B: I was just thinking that.
[00:14:53] Speaker A: But. But that's the reality, you know, that's the reality of how we continue to protect investors from the onset, during and after.
We want to know that we have the right to do it.
[00:15:06] Speaker B: Absolutely.
[00:15:06] Speaker A: Understanding whether there's collectibility there is key for us before we ask our investors whether or not they want to spend their money on it.
[00:15:13] Speaker B: Yes.
[00:15:14] Speaker A: But I think most investors are like, these borrowers are worth millions of dollars and you should just pummel them and you should sue them and you should. Okay, that's great. But putting bad money after bad isn't always the best approach.
[00:15:28] Speaker B: No.
[00:15:28] Speaker A: So if we, we feel like there is, you know, gold rainbow, we will go after it. But if we sense that there is some sort of financial crisis across the board.
[00:15:40] Speaker B: That's right.
[00:15:41] Speaker A: Then we're going to advise against it.
Yep, we're definitely going to advise against it. All right, so since we're going down this road, next question we're probably asking, and we'll reframe it to an investor, what happens if a borrower goes into default and they're probably thinking, is this going to be a nightmare if this thing goes wrong?
And talk to me a little bit about this because, you know, our business development executives lead with risk.
[00:16:10] Speaker B: Yeah.
[00:16:10] Speaker A: And we coach them to do that, we train them to do that. So talk to me a little bit about, you know, what happens when this goes wrong, because there, there could be a likelihood that they forgot the conversation they had two, three, five years ago.
[00:16:26] Speaker B: Everything's been going great. So they don't remember that. Yeah.
[00:16:28] Speaker A: Yes. So what happens? Like, what is the first thing that I should experience? Like take me on this journey of a default.
[00:16:38] Speaker B: Yeah. So like you said, we do lead with default. And the reason being is that we want to make sure that at the End of the day, our investors are able to sleep. At night, any lost sleep will be on us.
So if a borrower misses an interest payment, that's how a default starts, right?
[00:16:58] Speaker A: Yeah.
[00:16:59] Speaker B: So the first thing they're going to expect is on the 15th of the month, when they don't see that payment hit their bank account, they will have a communication for McKnight and it will be with what we know at that time, which may be limited or it may be. There may be a lot there. It's just what we can fact find at that point. But they will have some kind of communication and from there, Ignite handles everything. Now, investors, sometimes, I don't want to say they don't like that. I think they do like that, but they feel a little helpless and they get a little nervous and understandably so.
And so, you know, there's times where we, we have to go silent as we're gathering information and going through the necessary legal and, you know, time requirements that it takes where they, that's where they start to get nervous. They want to fill the void in that, in that gap in communication.
So they're going to get information from us on the 15th. We're going to keep them updated. We are obviously during that time having conversations with the borrower, visiting the property if we need to.
And then we're going to give the investors as a whole options.
And many times that option will be, do you want to go ahead and file a notice of default to start the foreclosure process?
In almost every state, foreclosure in itself takes a minimum of four months.
And I say minimum because there are legal protections that any borrower can utilize.
[00:18:28] Speaker A: Yes.
[00:18:29] Speaker B: That may delay that time frame. There may be times where we can work out a resolution with a borrower short of a full payoff that would provide funds to the investors that may also elongate that process, but all with the mindset of protecting investor principle first and foremost and providing as much return as we can for the investors as well.
[00:18:54] Speaker A: Okay, so what I'm hearing from being an investor myself is I'm hearing that from the 1st through the 10th, borrowers make their payments.
[00:19:05] Speaker B: That's right.
[00:19:06] Speaker A: Between the 10th and the 15th, Ignite funding is processing and handling the servicing of those loans in preparation of the 15th, sending out the interest payments. And if no interest payment is received on a loan, I should expect a communication.
[00:19:21] Speaker B: Absolutely.
[00:19:22] Speaker A: About why.
[00:19:24] Speaker B: Absolutely.
[00:19:26] Speaker A: Where is that information being relayed to.
[00:19:29] Speaker B: Me as a client on the client portal that is your. The place that I cannot recommend Enough clients become familiar with. Navigate through there. We put some pretty robust changes in. In the last, what, year and a half?
[00:19:42] Speaker A: Yes.
[00:19:44] Speaker B: And. And adding more all the time.
So you're going to be able to go there. If a loan is in default, you'll see it in a default section and it'll be on your statement, which you can access there as well.
[00:19:57] Speaker A: Yeah. And we've even taken pretty extreme measures to make sure that they know which loans in default.
Red banner on the statement in their. Yeah. In their investment allocation. They'll be able to click on it and get up to date communication, whether that be from the 15th or thereafter.
[00:20:17] Speaker B: Yeah.
[00:20:19] Speaker A: And there's a whole section on defaults for them to watch. Some of our podcasts where Pat and I've really gone into four parts. Yeah. Because there's so.
[00:20:28] Speaker B: Yeah.
[00:20:29] Speaker A: There's so many variables when it comes to defaults and something that is incredibly hard to explain. It's like trying to explain underwriting as the basics of your underwriting. When you're underwriting 15 different asset classes. Right.
[00:20:44] Speaker B: Exactly.
[00:20:45] Speaker A: There's no one size fits all. There's no, you know, round peg in a square. I mean it is just every variable that you can imagine. Every variable in that five day period. There's only so much that can figure out and relay without doing. The sky is falling.
[00:21:04] Speaker B: Absolutely. And things can change. Right. So we could communicate on the 15th that this is what's happening on the 16th. New information comes to light. And as it's relevant and vetted. Vetted. We will communicate that too. And it's important to remember that Ignite doesn't make decisions in these matters. We have to give that back to the investor. Majority.
[00:21:26] Speaker A: Yes.
[00:21:26] Speaker B: So there are many times I get a lot of questions about. I don't understand. I just want you to foreclose on that asset. Stop messing around with this borrower. I'm mad. I won't. I want the asset back. Forget the borrower.
[00:21:39] Speaker A: Yeah.
[00:21:39] Speaker B: Well, the thing is the other investors may not agree with you.
[00:21:43] Speaker A: Yes.
[00:21:44] Speaker B: And so they want to give more time to that borrower. And it's 51% majority.
[00:21:49] Speaker A: Yeah.
[00:21:50] Speaker B: So, you know, in every case. And then we have other investors who I've talked to, you know, and they're like, well, you know, I'm not going to vote.
Please vote. Please make your voice heard.
[00:22:02] Speaker A: Yes.
[00:22:02] Speaker B: Even if you vote. Yeah. It doesn't matter what you vote. We don't care. We're presenting options. We don't, you know, we're not trying to guide anybody in terms of how they want to vote. At the end of the day, it's investor money.
[00:22:13] Speaker A: Yeah.
[00:22:14] Speaker B: They should make that decision. But do participate in that because you want your voice to be heard.
[00:22:20] Speaker A: Did you haphazardly come up with 51%? Where does this come from?
[00:22:24] Speaker B: Well, you know, I thought it was a nice odd number. No, that is Nevada revised statutes. That is how Nevada determines the investor majority. And so we. We are bound by that.
We cannot Change that to 50%, 75%, 100%. Absolutely not. It is our regulations.
[00:22:48] Speaker A: It's balloted. It's up to the investors. Our job as the loan servicer is to provide as much information as we possibly can.
[00:22:58] Speaker B: That's right.
[00:22:59] Speaker A: With. Without persuasion, without, you know, we just got to give the facts, and then ultimately the investor decides one way or another. Now, they do call.
[00:23:08] Speaker B: They do.
[00:23:09] Speaker A: They want, you know, what do you have? You must have more insider information, those sorts of things. And our job is to just guide them through the process.
[00:23:17] Speaker B: Yeah.
[00:23:17] Speaker A: And that's really all we can do. You know, we're educating our staff prior to the communications going out, but they pretty much have the communication.
[00:23:27] Speaker B: We don't hold back.
[00:23:28] Speaker A: Yeah. We're not here to provide staff like nuggets that you don't get.
There's no reason behind that. Now, granted, while that communication is being written, there are things happening behind the scenes.
[00:23:42] Speaker B: Oh, absolutely.
[00:23:43] Speaker A: That will continue to happen until the next communication comes. And how long is it going to be before I get my next communication? Is it a day? Is it a week? Is it a month?
[00:23:53] Speaker B: That's a good question.
[00:23:54] Speaker A: When do you determine when I get more information?
[00:23:56] Speaker B: Well, you hit on something earlier, and that's vetted information, number one. And things in. In these cases, sometimes they change.
Wild swings, right?
[00:24:06] Speaker A: Yeah.
[00:24:06] Speaker B: And so we do have to make sure that everything we're communicating is true and accurate to the best of our ability.
[00:24:12] Speaker A: Yeah.
[00:24:12] Speaker B: So minimum investors are going to receive an update at least once a month. Now, that update may say there's no update at this time. It doesn't mean that we haven't put time and effort into that. It just means there's nothing new to communicate at that particular moment. But when there's vetted information that is relevant to the resolution of that loan, it does not wait till the end of the month. It gets posted as we know it.
[00:24:40] Speaker A: Yep, Absolutely. All right, we're going to take one more question, and then we're going to. We're going to wrap this and come back for part two.
Your game.
[00:24:51] Speaker B: I am.
[00:24:51] Speaker A: All right. So the last question that we'll talk about is how often does ignite funding experience defaults? Okay. Translation, is it going to happen to me? Odds this is going to happen to me.
[00:25:05] Speaker B: Yeah. Not often.
Not often. Which is surprising since we lead with that. Right. And a lot of times, and I always say to clients when I'm doing that first call with them, I say, listen, I'm going to give you worst case scenario because if you are good with the worst case scenario, the rest will be walk in the park.
[00:25:25] Speaker A: Yeah.
[00:25:26] Speaker B: So let's see. Last I just, I round up because I'm compliance. So less than 5% of all the loans that we've ever funded have gone into a foreclosure scenario.
Of that, less than half of 1% have had any kind of principal loss. And when I say any kind, that means if you lost a dollar in principal, that's a principal loss, right?
[00:25:49] Speaker A: Yeah.
[00:25:50] Speaker B: If we have never had a loss on a first lien position loan that was at 100% ever.
So chances are overall, if you're in a very well diversified portfolio.
[00:26:05] Speaker A: Yeah.
[00:26:06] Speaker B: You're going to have a default.
[00:26:07] Speaker A: Yeah.
[00:26:08] Speaker B: Because you're going on a lot of loans.
[00:26:09] Speaker A: Yeah.
[00:26:10] Speaker B: Right. And we want, by the way, that's not to say don't diversify. It is absolutely to say diversify. Just know it's going to happen. When it does, you will then become a better investor and have more faith in ignite. And I say that because you will see that what we say we're going to do from the very beginning, we actually do.
[00:26:29] Speaker A: Mm.
[00:26:30] Speaker B: So.
[00:26:31] Speaker A: So I don't want to put you on the spot with percentages. So let's just kind of look at it from generality.
You know, we've had very, very few loans go to foreclosure.
[00:26:44] Speaker B: That's right.
[00:26:45] Speaker A: So we're using the terminology default to mean past maturity date.
[00:26:51] Speaker B: Yep.
[00:26:52] Speaker A: Or interest has stopped. Interest payments have stopped. Stopped.
[00:26:56] Speaker B: Right.
[00:26:57] Speaker A: So there's really kind of three categories that we work within. Internally there is, which is forbearance, but in good standing. Meaning we've gone past a maturity date, but the borrower continues to make interest payments. There's so many variables or reasons why, but trust me, if we're asking for a forbearance, it's in the borrower and the investor's best interest.
[00:27:21] Speaker B: Yes.
[00:27:22] Speaker A: And we do have to look at this as a two prong approach because maintaining borrower strength is just as important as maintaining investor trust, period.
[00:27:36] Speaker B: Well, yeah. Nobody gets into this to own real estate. They're Here to invest on a loan and get paid interest every month. And that's what we want.
[00:27:44] Speaker A: We're not here to take assets either. No, we're not. That is not our overarching goal. Goal.
[00:27:50] Speaker B: Not at all.
[00:27:51] Speaker A: To loan to own. Right. That's not our goal.
[00:27:53] Speaker B: No.
[00:27:54] Speaker A: And so we will do whatever we can within our powers to maintain interest continuation, even if that includes forbearing that loan for a period of time while interest is being paid.
[00:28:09] Speaker B: Yep. But again, it's at the bar. It's at the. Rather the investor's approval.
[00:28:13] Speaker A: It absolutely, absolutely is. It absolutely is. But know when we ask for it, you know we're asking for a reason and it's. It's to benefit both parties.
[00:28:21] Speaker B: Definitely.
[00:28:22] Speaker A: The second is category is foreclosure.
[00:28:26] Speaker B: Yeah.
[00:28:26] Speaker A: This is an inevitable. Interest payments aren't being made. We're heading down the path of foreclosure.
This category is really interesting. I was looking at our trends from 2011 to current on that, and a very high percentage of those resolved. Resolved before the foreclosure occurs.
[00:28:44] Speaker B: That's right.
[00:28:45] Speaker A: And that means there's a lot of communication going on between you writing communication, putting it on the client portal, balloting, and really working towards a resolution again, in the best interest of both the borrower and the investor. And sometimes those options seem crazy misty. Sometimes they're like, why would we do this? Why would we collect a little bit more from that borrower to prolong this? Why are we. Why do we continue to do this? And I'm sure some investors are just scratching their heads, why are we doing this?
And there is always a reason. There's always an underlying reason. It could be because we've evaluated the current condition of that area, that asset type, that class, what's going on.
Maybe the valuation has changed to the point where it's important for the borrower to maintain the property. But we know that if we were to take it back and sell it, there could be potential loss.
[00:29:50] Speaker B: Yeah.
[00:29:51] Speaker A: So better to keep it intact with a borrower that's committed. Right. They probably have skin in the game. They don't want to lose their money.
[00:29:57] Speaker B: Yeah. If they're making a payment towards that, that tells you you quite a bit.
[00:30:01] Speaker A: It does.
[00:30:02] Speaker B: You know, it does.
[00:30:03] Speaker A: And I think for investors it's like, well, then it tells me that there must be a ton of equity. Take it back, sell it. I want to sell it now.
That's not always the case because you have to remember, you know, when borrowers come to us for lending, we don't lend 100%.
[00:30:18] Speaker B: Right.
[00:30:19] Speaker A: So chances are they've got capital in the ground, they've got friends and family that they need to answer to. There's so many things that maybe are even unknown to us to some degree.
[00:30:31] Speaker B: Absolutely.
[00:30:32] Speaker A: But if we feel like there's opportunity to get 100% of capital back, maybe the interest as well, we're always going to strike when that opportunity knocks.
[00:30:42] Speaker B: Absolutely. And you know, the interesting thing to point out too, and a lot of questions I get is, well, you're not telling me anything in these ballots.
We are.
So please take the time to really read the ballot and if you don't understand something in there, then call us up. We're happy to go through it because we put a lot of information in there. So, you know, some of the ones that came to mind as you were talking, we're telling you what the valuation as we know it is on a property at that given time. And therefore, while we're not telling you how to vote, we're giving you the facts so that you can make an educated decision on that. And you know, if a borrower is willing to pay a fee.
[00:31:24] Speaker A: Yeah.
[00:31:24] Speaker B: That can be passed on to our investors, money in their pocket to prolong that. And we do not feel that taking it back is going to be a benefit to investors overall, then we are definitely going to ballot and ask for that extension. If that weren't the case, well, you probably wouldn't see a ballot from us on that.
[00:31:43] Speaker A: Absolutely.
[00:31:44] Speaker B: You know.
[00:31:44] Speaker A: Absolutely.
[00:31:45] Speaker B: We're always looking out for our investors. Best interest.
[00:31:47] Speaker A: Yeah. If there's viability, you're going to hear from us.
[00:31:50] Speaker B: If it's a viable offer.
[00:31:51] Speaker A: Yes. If it's ridiculous, probably not.
[00:31:55] Speaker B: Yeah, we get those, but we do.
[00:31:57] Speaker A: And some of them you just kind of have to laugh off and move on.
So. Okay, well, here's what investors are thinking but not asking. This is part one. We're going to come back for part part two and we hope that you'll join us. I'm Carrie Cook, president of Ignite Funding. Misty Bethany, chief compliance officer. We'll see you next time.
Thanks for joining us this week on Deeds in the desert, where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right?
Still hungry for more education? Visit our
[email protected] or if you're ready to take the leap and start investing, give us a call at 702-761-0000 and schedule a free investor consultation.
