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(Ignite Funding) Trust Deeds vs REITs

Defaults are always a possibility for anyone lending in real estate, whether it is an individual private lender or a “crowdfunded” real estate development investment. The way the default situation is handled can be detrimental to the return on your initial investment. As a loan manager for Trust Deed real estate investments, Ignite Funding stands behind every loan it issues, often wearing many different hats to protect and return investors’ capital in the event of default. Ignite Funding uses its real estate expertise to act on behalf of its investors as a default coordinator and asset manager if a default needs to be resolved through foreclosure. At Ignite Funding we can say that we have a proven track record of defaults resolution which is supported by the results our investors have achieved, having gone through and grown since the 2008 downturn. In this article we discuss how the default process is handled at Ignite Funding. when it’s necessary.

When is a loan considered to be in default?

A loan is classified as “in default” when a borrower fails to make an expected interest payment within the payment grace period (10 days after the payment due date). In this situation, Ignite Funding will already be in contact with the Borrower to determine the timing of the overdue payment and to extract a reasonable explanation for the default. Ignite Funding will then send a communication to investors no later than the 15th of the month if a borrower does not make the scheduled interest payment on time. Meanwhile, Ignite Funding will switch from Loan Servicer to Default Coordinator on behalf of the investors on the defaulted loan.

What are the investor’s options when the borrower defaults?

Through borrower communication and property condition assessment, and in the best interest of the investor, Ignite Funding will present investors with the most viable action plans for consideration and consideration. vote by ballot. For example, the most viable options might be to negotiate a loan modification or forbearance with the borrower. This could potentially mean negotiating anything, whether it’s a lower interest payment (modification) or delaying foreclosure proceedings and forgoing interest for a certain period (forbearance). It can often be in the best interests of investors to delay foreclosure to give the borrower time to repay the loan principle, avoiding the fees incurred to foreclose a property and the associated carrying costs to maintain and market the property. until the sale. The most viable options for investors could also be to immediately start the foreclosure process or, if the borrower wishes, to sign a deed in lieu of foreclosure in order to repossess the property for sale and recover as much of the outstanding principle. as possible.

An investor’s vote weight is the investor’s remaining capital balance divided by the property’s total remaining capital balance. The majority vote decision on how to proceed on the property is based on the majority vote of 51% of the loan balance made by all investors on the loan.

What happens after a majority decision of 51% of investors is made?

Ignite Funding will take action on the property as directed by the majority of investors. Depending on the situation, this could mean coordinating with the borrower in executing a loan modification or forbearance. This could mean coordinating with the securities company to register a notice of default, initiate foreclosure proceedings, or register a deed in lieu of foreclosure. Ignite Funding will communicate with investors either by email and / or through the creation of a website portal, keeping them informed of the progress and status of these proceedings.

What if investors choose to repossess a property through foreclosure?

When a notice of default is recorded on the property, the borrower is given a specific “processing period” (typically 90 or 120 days depending on the condition in which the property is located) during which to make the adjustments. current payments and / or pay off balances owed on the property. The borrower has until the trustee’s sale date (the foreclosure date) to settle the debt or the borrower’s claim on the property will be eliminated. Investors will then move from being a lender to owning an asset. To facilitate real estate ownership, a special purpose entity (a Limited Liability Company – LLC) is created by Ignite and is registered to title as the owner of the property.

Ignite Funding is not the owner or a shareholder of the LLC. This is when Ignite Funding puts on the “hat” of asset manager, handling everything from property maintenance and expense management to individual ownership issues on behalf of individuals. owner investors. In conjunction with the property maintenance functions performed as an asset manager, Ignite Funding coordinates the following with the goal of identifying a workable resolution for the property in question: Property Marketing and Agent Agreements listing, soliciting developers and / or builders as potential joint venture partners, negotiating sale or joint venture ownership, updating investor ownership and communicating proposals.

Are there any expenses associated with a default and / or foreclosure?

The default process can be overwhelming for investors who have never repossessed a property through foreclosure. When a borrower defaults on a loan and the investor (s) ask Ignite Funding to take protective action, there are inherent costs to the foreclosure process. These costs are the responsibility of the investor (s) of the property.

At its discretion, Ignite Funding may assume the costs of repossessing a property through foreclosure. These expenses will be reimbursed to Ignite when the property is sold. If Ignite Funding chooses not to pay the expenses, Ignite Funding will request a fundraiser from investors to complete the foreclosure process. If an investor is unable to meet the requirements of a call for capital, Ignite Funding will offer investors the option of borrowing funds from Ignite Funding at an accrued interest rate to be repaid on the sale of the fund. property.

Can an investor avoid defaults?

The only way for an investor to completely avoid defaults would be to not invest in real estate development. Payment defaults are the risk inherent in real estate investments. It is important to understand this risk and your risk tolerance before committing to this type of investment strategy.

When you invest in trust deeds with Ignite Funding, you don’t just have collateral to back up your investment. You have an experienced loan manager, default coordinator, and asset manager working in your best interests to make this investment as profitable as possible.

If you learn more about Trust Deed Investments, visit our website www.ignitefunding.com, text “Investments” to 844 552-7022 and click here to schedule a FREE 15 minute no obligation consultation to discuss how these investments can fit into your portfolio today!

Ignite Funding, LLC | 2140 E. Pebble Road, Suite 160, Las Vegas, NV 89123 | 702.739.9053 | T 877.739.9094 | F 702.922.6700 | NVMBL # 311 | AZ CMB-0932150 | Money invested through a mortgage broker is not guaranteed to earn interest and is not insured. Before investing, investors should receive the applicable disclosure documents.



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