Six Layers
How every loan is protected
Recorded First Lien
Every loan secured by a recorded deed of trust or mortgage, providing a prioritized legal claim on the property. If the borrower can't pay, we have first rights to the asset.
Full Personal Guarantees
All borrowers provide full recourse guarantees. The fund can pursue personal assets beyond the collateral property. This creates strong incentive for borrowers to perform.
Conservative Leverage
Up to 80% of cost, 70% of stabilized value. Every loan adjusted downward by proprietary risk scoring across 25+ factors. The 20-35% borrower equity cushion absorbs losses before our lien is impaired.
Background & Credit Screening
Every borrower and principal undergoes comprehensive screening: criminal background, bankruptcy, foreclosure, judgment review, financial statement analysis, and credit evaluation.
Title, Hazard & GL Insurance
Title insurance protects lien priority. Hazard and general liability insurance protects against property damage and third-party claims. The fund is named as loss payee on all policies.
Active Loan Management
Ongoing borrower reporting, draw verification against verified completion milestones, site inspections when warranted, and covenant compliance tracking through maturity. We don't fund and forget.
GP First-Loss
Loss absorption waterfall
The General Partner has committed $1,000,000 of its own capital in a subordinated first-loss position. This capital absorbs losses before any Limited Partner is impacted.
Borrower equity absorbs first
On a 75% LTC loan, the borrower has 25% equity at risk. Property values must decline past that entire cushion before our lien is impaired.
GP backstop absorbs next
Realized losses exceeding borrower equity are absorbed by the $1M GP Backstop Account, pro-rata across affected LPs. GP capital is wiped out before any investor dollar is touched.
LP capital protected
Only after the full $1M GP backstop is exhausted are losses allocated to LPs. Personal guarantees provide an additional recovery path beyond the collateral.
Recovery and replenishment
Subsequent profits restore LPs to their original contribution first, then replenish the GP Backstop, then resume the normal distribution waterfall.
The GP does not earn Performance Allocation until investors receive their 10% preferred return. Full alignment.
Default Handling
What happens when things go wrong
This hasn't happened. But if it does, we have the infrastructure, legal rights, and operational capability to protect investor capital at every stage.
Stage 1
Early Warning
Missed payment triggers immediate outreach
Financial review of borrower and property status
Site visit if warranted
Identify root cause: cash flow gap vs. fundamental problem
Most issues resolved here through modification or additional collateral.
Stage 2
Default & Cure
Formal notice of default per loan documents
Cure period begins (typically 30 days)
Counsel engaged; enforcement prepared in parallel
Evaluate whether property value supports full recovery
Borrower cures or we escalate. Personal guarantee creates strong incentive.
Stage 3
Enforcement
Foreclose on property via deed of trust
Pursue personal guaranty against borrower assets
GP takes operational control of the property
Our MHC/MF infrastructure means we run it ourselves
We don't hire a liquidator. We operate the asset.
Stage 4
Recovery
Property sale or refinance recovers principal
Guaranty pursuit recovers any shortfall
GP Backstop absorbs losses before LP capital
Title and hazard insurance covers lien and property risks
Multiple recovery paths ensure maximum protection.
In 70+ loans originated, this process has never been triggered. Zero defaults. Zero principal losses. But we build every loan as if it will be tested.