Next: See how easy the closing is.
Invest Small—Earn Big
Our loans require a much smaller investment than most mortgage lending investments available, yet still offer a generous rate of return. This makes it easier for:
- Small investors to participate, and
- Medium and large investors to diversify.
Mortgage & Note Already Done
You don’t have to do any of the initial red tape that goes with mortgage lending. You take over after all the initial work is done, but still get the same security as if you were the original lender.
Loan Payments Tied to Paydays
The borrowers’ loan payments come out of their bank accounts the same day their income payments are automatically deposited. At some banks, this happens within microseconds.
This makes it much easier for the borrowers to stay current on their home loans.
Low Loan Payments
Compared to most households, the borrowers have very low loan payments. To live anywhere else would cost them significantly more.
This gives the borrowers a huge incentive to stay current on their loans. The low LTV also gives them another huge incentive.
Problem Payments Flagged Immediately
With automatic electronic payments, any late payment gets flagged on day two. This allows us to rectify problem situations before they go too far off the rails.
No Partial Prepayments
Most home loans have no minimum prepayments. They can even be as little as $.01. Partial prepayments cause extra bookkeeping. To avoid this, our prepayment terms are simple—all or nothing. Most borrowers would have to sell or refinance to pay you in full, neither of which is likely.
Full Recourse
See the advantages of full recourse.
Unique Approaches to Insurance
Most mortgage loans involve title insurance and casualty insurance. For these micro-loans, we use different approaches.
Title
Traditional title insurance is not practical for these small loans. Instead, we use a new approach advocated by Fannie Mae, attorney opinion letters, commonly called AOL’s. Our AOL’s meet Fannie Mae standard with two exceptions:
- We usually don’t bother with surveys on these small deals, and
- We do include manufactured homes if they are titled and taxed as real estate and permanently affixed to land owned by the homeowner.
Title issues are rare. The title industry averages paying out about 4% of its premiums in claims, which comes out to about 0.03% of the value of the property insured. We have been buying real estate since 2018 with no title insurance.
Claims with AOL’s
In order to meet Fannie Mae standards, title claims are made directly to the attorneys’ errors and omissions carriers. At that point, they are handled in much the same way as they would be by a title insurer.
Casualty
Most of the properties in this program don’t have property insurance, and the insurance requirement is excluded from the mortgage. Why? Either the properties wouldn’t qualify or the cost is prohibitive.
Offsets
Several things offset this:
- You get a higher interest rate,
- The casualty risk is low, and
- Even in a total disaster, you can expect the land value alone to cover the unpaid balance.
Enhanced Interest Rate
Because of the insurance waiver, you get a premium interest rate.
Fire Risk Is Low
Home fires are terrible but, fortunately, infrequent. Statistics count all fires and total loses. The statistic for all fires includes even those as minor as small stove top fires.
Here are the Florida home fire stats for 2024, a typical year:
| Ratio | Percentage | |
|---|---|---|
| All Fires | 1:400 | 0.25% |
| Total Destruction | 1:3000 | 0.0333% |
Hurricane Risk Is Lower
Hurricanes and their aftermath make big headline news. However, the:
- Destruction is mostly isolated, and
- Total destruction numbers are half that of fires.
Here are the average annual Florida stats for the past 10 years for hurricane related damages to homes:
| Ratio | Percentage | |
|---|---|---|
| Any Damage | 1:150 | 0.67% |
| Total Destruction | 1:6000 | 0.0166% |
We’re also spread geographically, serving all 67 counties in Florida, so the risks are diversified.
Land Value Alone Is Enough
Let’s take the worst case scenario for a property, where a casualty destroys everything above ground, which, as the statistics show, rarely happens. The land still survives.
Because of the low LTV, even after total destruction we can still expect the land value to cover the balance due on the loan.
This wouldn’t work on higher LTV loans, but, at our LTV levels, it does. Properties are specifically screened with this in mind. We also screen for flood zones and sinkholes.
Extended Cure Time
Most home loans give the borrowers 30 days to cure any default. The notes from the borrowers have that provision, but our full recourse agreement with you gives the trust 90 days to cure. Why? So the trustees can either get things resolved with the borrowers or begin foreclosure proceedings.
Meanwhile the trust is obligated to step in and keep the installment payments to you current.
Trustee Support
In addition to getting the income stream from the borrower, you get, from the trust, at no extra charge, the:
- Enforcement of:
- Loan payments,
- Property tax payments, and
- Property Maintenance; and
- Obligation to step in and pay if the borrower fails to do so, i.e., full recourse.