THE OFFICIAL MAGAZINE OF GERACIAUGUST 2022 A DYNAMIC PLAYER IN THE EMERGENT NON-QM LENDING MARKET CAPTIVATE SPECIAL EDITION CONSOLIDATEDINSIDE:ANALYTICS Technology-DrivenSolutions TITANS Steve Trowern, Temple View Capital TRAILBLAZERS Linda ANDAAPLHyde,MORE...
2 TOOL S YOU NEED To get where you want to be... At Pacific Private Money, we strive to provide best-in-class alternative financing solutions for real estate transactions. Our team of experienced professional has built and earns a reputation for transparency, speed, and reliability. Lending Parameters Ground Up Construction Fix & FlipCommercial BridgeConsumer Bridge Max Loan Amount $5M $36M Up to $30M Interest Rates 6.99% 8.99% 6.99% 8.99% 8.99% 10.99% Location California and Arizona Various Various Up to $30M 7.99% 9.99% Various Whether you are a self-employed borrower with a seasoning of funds and reserves issue, a real estate professional trying to provide their client with all the options available to them, or a mortgage broker who wants smart funding to achieve their client's goals, private money is a great tool that gives the borrower lending luxuries such as the ability to make cash-like o ers. FA S T, R ELIAB L E, E AS Y & EFFICI EN T SINCE 2008 L O AN A GEN T S W ANTED ! W HIT E L A BE L L O A N O PPO R T U NITIES AV AI L AB L E Pacific Private Money Inc. | 1555 Grant Ave. | Novato, CA 94945 | Phone: 415-926-4444 NMLS ID: 945582, California Department of Financial Protection and Innovation: 6054605, Real Estate Corporation License Endorsement: 01897444. *Loans will be arranged or made pursuant or made pursuant to a California Financing Law License
August 2022 Originate Report 3 AUGUST 2022 CONTENTS 282212636 COVER STORY 6 Acra Lending: A Dynamic Player in the Emergent Non-QM Lending Market By Mark Dewyea, Contributing Writer for Originate Report TITLE SPONSOR 12 Consolidated Analytics: Technology-Driven Solutions for Next-Level Organizational Optimization By Mark Dewyea, Contributing Writer for Originate Report FEATURE ARTICLES 22 How Lend2Live is Democratizing Access to Private Lending Knowledge By Mark Dewyea, Contributing Writer for Originate Report 34 Meriwether Group Capital’s Hero Fund: Boosting Sustainable Entrepreneurial Growth By Mark Dewyea, Contributing Writer for Originate Report 44 Futures Financial: Real Estate Investment, Evolved By Charles Peckman, Contributing Writer for Originate Report 56 ZINC Financial: Lending Worth its Metal By Charles Peckman, Contributing Writer for Originate Report GOLD SPONSORS 18 The Bedrock Mortgage Fund: Getting to the Bedrock of Real Estate Investing By Charles Peckman, Contributing Writer for Originate Report 26 Constructive Capital: Building Sustainable Lending Practices By Mark Dewyea, Contributing Writer for Originate Report 32 AlphaFlow: Leveraging the Power of Technology to Connect Main Street & Wall Street By Mark Dewyea, Contributing Writer for Originate Report 40 Roc Capital: A Masterclass in Sustainable Lending By Mark Dewyea, Contributing Writer for Originate Report 48 Precision Capital: Navigating a Changing Lending Landscape By Charles Peckman, Contributing Writer for Originate Report 52 PeerStreet: Making Real Estate Financing Better for Everyone By Mark Dewyea, Contributing Writer for Originate Report CONTRIBUTED ARTICLES 50 Diversification versus Specialization: Who is Better Poised/Positioned to Weather the Potential Storm Ahead? By Lauren Shea, Temple View Capital 58 Leveraging Talent to Build Programmatic Deal Flow By Tricia Mitchell, Archwest Capital 62 How Opening the Economy Back Up Should Affect Private Lending By Edward Brown, Pacific Private Money PRIVATE LENDING TITANS 28 Steve Trowern, Co-Founder and Managing Partner, MCM Capital Partners/Temple View Capital PRIVATE LENDING TRAILBLAZERS 36 Linda Hyde, Managing Director, American Association of Private Lenders
4 For More Information About Our Conferences & Events: Ruby Keys • (949) 379-2600 • r.keys@geracillp.com • https://geracicon.com/ THANK YOU TO OUR SPONSORS 2022 CONFERENCE CAPTIVATE
The themes of capital-raising and deal flow are at the heart of our show and of this issue. Each of the companies who grace the pages of this month’s edition have a different story to tell – but all show grit and innovation in their approach to the changing demands of their clients and prospects alike. To succeed in this industry, you must be open to change and take advantage of the opportunities presented in the marketplace. Acra Lending, our Captivate Cover Story, has gone “all-in” (in Vegas speak) on a “comprehensive suite of innovative lending solutions”. “Assisting lenders in realizing their clients’ acquisition and investment objectives through Non-QM mortgage solutions was the primary motivation behind the genesis of Acra Lending. Initially specializing in alternative income products—to include bank statements, asset depletion, and verification programs—Acra Lending’s initiatives have gradually evolved over time to incorporate fixed and adjustable-rate mortgages (ARMs) for residential assets on both owner-occupied and non-owner-occupied contexts.” The Acra Lending team is now gearing up to develop innovative and flexible offerings in several other key market sectors, including negotiating private financing for investors planning to acquire smallbalance multifamily property assets comprised of five to twenty-nine units. With an eye toward scaling and growing their core business, Acra Lending is projecting $2.5 billion-plus in originations in 2022 which is up 23% over the same time last year. Check out this month’s cover story to read about the unique niche that Acra Lending occupies in this space.
August 2022 Originate Report 5 FOUNDINGMARKUNDERWRITERSHANF President, Pacific Private Money GeraciCEOLLP ANTHONY GERACI a.geraci@geracillp.com Senior Vice President, Marketing LESLEY BOYD Leadl.boyd@geracillp.comGraphicDesigner LYNDA HIGHT l.hight@geracillp.com Editor/Copywriter LAUREN LOPEZ CharlesLaurenl.lopez@geracillp.comCONTRIBUTORSShea•TriciaMitchellEdwardBrownPeckman•MarkDewyea ORIGINATE REPORT www.geracilawfirm.com/originate-report GERACI LAW FIRM www.geracilawfirm.com LIGHTNING DOCS www.lightningdocs.com CONFERENCE LINE www.geracicon.com
The tone of this year’s Captivate Conference may feel different than years past. We are again on a precipice where, depending on the state of the economy in the near future, you may have to make difficult decisions about your business. But the quote above speaks the truth and I will take it one step further. The ability to be successful regardless of the environment is in your hands. You can adapt, survive, and thrive, or you can remain stagnant in your thinking and product offerings and be a step behind your competition.
Welcome to August’s Captivate Special Edition of Originate Report! Change is inevitable. Growth is optional. -John C. Maxwell
At Originate Report, we are currently searching for companies in the private lending industry who are making a name for themselves in the marketplace for our AAPL special edition. If you are interested in #sharingyourstory with our readers, please contact me at submissions@originate.report to learn more about our feature options. All of us at Geraci look forward to seeing you soon to help you facilitate your deal flow and capitalraising activities. Until next time, Lesley
Originate Report recently had the opportunity to speak with Keith Lind, Chief Executive Officer (CEO) of Acra Lending, to learn more about the exponential rise of Non-QM financing and the key role that Acra plays in facilitating access to capital for investors.
What options does an as piring homebuyer or investor have who can not meet the stringent qualification criteria for a conventional loan? For many entrepreneurs and small businesses, obtaining the requisite capital to grow and scale their operations is a seemingly insurmountable hurdle. Luckily, Acra Lending offers flexible and innovative Non-QM capital solutions to bridge the significant funding gap left by traditional banks following the implementation of the updated QM lending regulations by the Consumer Financial Protection Bureau (CFPB) following the Great Recession of 2007.
Lending
6
COVER STORY GOLD SPONSOR
Keith Lind CEO, Acra A DYNAMIC PLAYER IN THE EMERGENT NON-QM LENDING MARKET
By Mark Dewyea, Contributing Writer for Originate Report
Kyle Gunderlock President & Chief Risk Officer Jeffrey Lemieux Managing CorrespondentDirector,Lending Gregory Meola Managing Director, Head of Business Development & Strategy Hitz Mistry Marketing Director
Assisting lenders in realizing their clients’ acquisition and investment objectives through Non-QM mortgage solutions was the primary motivation behind the genesis of Acra Lending. Initially specializing in alternative income products—to include bank statements’, asset depletion and verification programs—Acra Lending’s initiatives have gradually evolved over time to incorporate fixed and adjustable-rate mortgages (ARMs) for residential assets on both owner-occupied and non-owner-occupied contexts. Acra Lending is licensed by the National Mortgage Licensing System (NMLS) and offers comprehensive programs and services via four distinct verticals: Wholesale Lending, Consumer Direct Lending, Investor Lending, and Correspondent Lending. Acra has garnered an industry-wide reputation for responsible lending methods, developing innovative solutions to emergent market issues and unparalleled customer service. Private lenders presently represent approximately 15% of the entire mortgage industry, having expanded their presence in the space to meet the growing demand from investors and high-equity borrowers who are forced to pivot from traditional bank financing that lacks the requisite efficiency and customization options needed to grow and expand their businesses. “The private lending space is regulated just like the agency space,” Lind said. “A high percentage of the time, we can find a solution for our borrowers. We can look outside of our guidelines and find solutions for very difficult situations." Acra Lending has established itself as one of the premier Non-QM lending organizations on a national scale, actively operating in 43 states through a strategically planned network of offices in nine states spanning coast to coast.
The Emergence of Non-QM Funding Within the mortgage-financing niche, there is a unique product category that is effectively identified by what it is decidedly not: non-qualified mortgages (Non-QM). Non-QM loans are also known as non-prime, nonagency, or alternative-documentation
The Genesis of Acra Lending
August 2022 Originate Report 7 Acra Lending: Continues on pg. 8
8 Acra Lending: Continued from pg. 7 loans. The world of Non-QM singlefamily mortgage offerings is diverse and challenging to succinctly define, but understanding these products is essential. A substantial percentage of borrowers in the Non-QM space comprise the backbone of the national economy, including those who are self-employed and the savvy entrepreneurs who purchase single-family investment assets. These individuals, however, often encounter a roadblock when it comes to qualifying for financing using traditional documentation such as proof of income, forcing them to utilize alternative documentation like bank statements, assets, or debtservice coverage ratios (DSCR). The demand for Non-QM loans, particularly in the secondary marketplace, has grown substantially over the past year. Many industry experts are forecasting that this trend will continue, subsequently fueling the expansion of private label securitizations for the foreseeable future. Should the Non-QM privatelabel market hit the $40 billion mark as some are now predicting, that still only accounts for a mere fraction of the market’s loan-origination maximum—as the current market size is estimated to be somewhere in the region of $175 to $200 billion. Non-QM loans are also advanta geous to borrowers experiencing credit challenges, including recent bankruptcy or less-than-ideal credit scores. The loans may entail inter est only, longer terms, or similarly zcreative repayment options spe cifically tailored to reduce monthly installments on the front end of the mortgage—typically to refinance or sell the property in the short-term.
The good news is that the latest iterations of Non-QM mortgages are not a repeat of subprime loans, which were the volatile, loosely underwritten mortgages that prompted the downfall of the housing market in 2007. Lind points out that lenders need to be meticulous with their underwriting process with an increasing number of brokers being drawn to the Non-QM marketplace as the refi market is forecasted to dip by as much as 60% over the coming months. “Acra employs a thorough internal vetting process of all brokers,” he explained. “Unlicensed brokers have an increasing presence in the industry, and they may lack a certain knowledge base or leverage capacity. We conduct an exhaustive due diligence analysis to ensure the best end product for our customers.” Acra’s offering of NonQM/non-prime loans are upheld to a significantly higher standard when it comes to credit prerequisites, income, and asset thresholds, as they must comply with federal Ability to Repay regulations.
Comprehensive Suite of Innovative Lending Solutions Acra Lending’s client base is comprised of high-equity clientele in addition to both beginner and experienced real estate investors looking for private funding options that traditional banks simply cannot offer. “A substantial portion of our clients are self-employed borrowers, and this has become the backbone of the Non-QM or private lending space after the CFPB and Dodd Frank implemented the ATR guardrails in 2014,” Lind noted. “More and more people are becoming entrepreneurs and work for themselves, which is a huge part of our business. We have seen it grow every year and expect this trend to continue.” An additional significant percentage of Acra Lending’s borrowers is sophisticated investors who are actively seeking negotiable private financing solu tions. "Investors represent about 35 to 40 percent of our production,” Lind added. Acra Lending offers a comprehensive range of funding programs, including solutions geared towards fix-andflip and ground-up construction projects, as well as financing options for multifamily properties. “We have had great success in rolling out our fix-and-flip product. The average house in America is 40-years-old, and a lot of them need a facelift, so fix-and-flip is a vertical that we are very excited about, and we are looking at it as a lending space that is going to be around for a very long time,” Lind stated. The Acra Lending team is now gearing up to develop innovative and flexible offerings in several other key market sectors, including negotiating private financing for investors planning to acquire smallbalance multifamily property assets comprised of five to twenty-nine units. Lind and his team are also actively looking to play a central role in addressing the ongoing housing shortage issues plaguing major markets across the nation by working with savvy investors in the ground-up construction space.
We invest in the latest technology and the industry’s best people to provide a smooth experience that is not only efficient but fast. We focus on improving processes by rigorously reviewing our lending practices to ensure that every loan we provide is consistent.
August 2022 Originate Report 9 Acra Lending: Continues on pg. 10
We regularly survey our customers to develop training focused on providing you with best-in-class customer experience. OptimalConsistency
Plans to Scale & Grow Acra Lending Based on the numbers alone, Lind and the rest of the Acra Lending leadership certainly are doing some thing right. “We did a little over $2 billion in 2021 and are projecting $2.5 billion plus of originations in 2022,” Lind explained. “From Efficiency
The forecasted dip in the refi mar ketplace will only provide further fuel to accelerate the already expo nential growth in the private lending world. “There is a huge tailwind for us,” Lind commented. “My predic tion is that the private lending space is going to have a very good stretch, not only for the remainder of 2022, but for many years in the future.” The statistics certainly support this opti mistic perspective, as Lind pointed out: “In the pre-Covid era, around 12% of homes in 2019 were acquired by investors. That number jumped to more than 25% this past year and the majority of these investors are ‘mom and pop’ entrepreneurs who are ideally positioned for Non-QM funding options.”
For more information about Acra Lending and its products, please visit: https://acralending.com/
For More Information: https://acralending.com/ NMLS ID #144549 November 2021 to January 2022, we are up 23% in the number of loans funded." The lender has also in creased its staff from 200 employees in 2020 to more than 350 today. Lind intends to add top-tier talent to the already outstanding Acra Lending workforce to continue delivering un paralleled customer service. It is likely Acra will need the extra manpower given the recent uptick in interest rates—a trend that is expected to continue for the fore seeable future—creating the perfect marketplace for increased Non-QM lending demand. “Consider all the mortgage brokers last year that did not consider Non-QM as an option and solely focused on agency and jumbo loan products because they were the low-hanging fruit,” Lind observed. “Well, guess what? If rates go up, even just incrementally, those brokers will have to find new alter native products to focus on—namely, Non-QM loan options.”
Leveraging Wall Street Resources to Empower Main Street Investors The Non-QM niche offers untapped potential for lenders looking to diversify their offerings. “Liquidity is extremely important when you are a lender and is the number one thing that comes to mind,” Lind advised. “Having strong capital partners is also extremely important, whether it is our institutional partners who purchase our loans or capital partners [banks] that finance our business. We partner with moneycenter banks and capital providers.” These key partnerships with mul tinational capital backers were es sential for Acra’s stability during the COVID-19 pandemic. Lind worked on Wall Street with several of these major financial players and lever aged these relationships to ensure Acra maintained unfettered access to capital to sustain lending operations regardless of the less-than-ideal external market factors that forced competitors to shutter their opera tions. “Working with major financial institutions provide us the resources and working capital to adapt to a Acra Lending’s client base is comprised of high-equity clientele in addition to both beginner and experienced real estate investors looking for private funding options that traditional banks simply cannot offer.
One thing is certain: there is unde niable opportunity in the Non-QM sector, and Acra Lending is ideally positioned to service this increasingly popular alternative financing solution.
10 Acra Lending: Continued from pg. 9 comprehensive range of products,” he mentioned. “This provides Acra with an enviable degree of flexibility when it comes to pivoting and adapt ing to emergent trends—allowing us to do so more quickly than the competition and respond to our clients’ needs efficiently.”
August 2022 Originate Report 11
Technology-Driven Solutions for Next-Level Organizational Optimization Making Real Estate Financing Better for Everyone
TITLE SPONSOR
By Mark Dewyea, Contributing Writer for Originate Report
12 Imagine a one-stop-shop for real estate finance industry entities seeking end-to-end mortgage services accessible via a userfriendly, cutting-edge online platform that delivers actual value from enterprise workflow optimization and innovative asset-level analysis. Does that sound too good to be true? The good news is that it is not. The multi-dimensional team of experts at Consolidated Analytics is continu ally improving their comprehensive suite of products by harnessing the power of data and technology to assist forward-thinking companies unlock loan and operational quality, efficiency, and performance.
Originate Report sat down with the leadership team at Consolidated An alytics to get a unique first-hand perspective of how the company utilizes technology to empower its clients to take their business opera tions to the next level and adapt to an evolving marketplace. What was the inspiration behind the formation of Consolidated Analytics? Consolidated Analytics (CA) has not followed the traditional path for business growth. It started as a small 25-employee Appraisal Manage ment Company, Standard Analytics. In 2009, Brian Gehl, a serial entrepreneur with a passion for real estate and CA's current president, acquired the controlling interest, and the company became Consolidated Analytics. In 2013, Arvin Wijay, CA's current CEO, who had recently sold his own mortgage services company, acquired a partnership interest in CA and launched the due diligence operation. In 2015, CA acquired Operational Excellence Now and began to deliver consulting and strategic advisory services to clients. In 2017, CA bought Equitable Mortgage Solutions, with Joe Andrea and Rudy Zabran joining the company to drive solution development. Since 2018, CA has launched component servicing solutions and has acquired
• Design a practical, realistic process automation roadmap that addresses current challenges and prepares your systems for future needs
We are constantly upgrading our val uations and AI tools and developing new platforms to streamline and save our clients time and money.
What makes Consolidated Analytics unique? Consolidated Analytics provides the real estate finance industry with an end-to-end mortgage services platform that delivers value to its customers, from asset-level analy sis to enterprise optimization. By harnessing the power of data and technology – and tapping into our mul tidisciplinary team's expert insights – we help companies unlock loan and operational quality, efficiency, and performance. Consolidated Analytics serves clients in mortgage lending, servicing, and capital markets. We offer tailored solutions that span the mortgage value chain, including val uations, business process services, due diligence, and consulting services.
August 2022 Originate Report 13 Carrington Property Services. In addition, CA has built a custom client due diligence platform and has approval from all ratings agencies.
• Reduce fragmentation and drive greater connectivity across data, people, and processes
What competitive edge does Consolidated Analytics offer its clients? Our solutions span the spectrum of real estate finance and include prop erty valuation services and analytics, mortgage business process solutions, consulting and strategic advisory ser vices and asset due diligence. Let us explore this comprehensive range of services further one-by-one: Property Valuation & Analytics: For individuals looking for turn-around times, unpar0alleled customer service, and in-depth analysis of collateral value, CA is the answer. We offer proprietary products, analytical excellence, and next-level service to satisfy even the most complex valuation scenarios. The CA team knows high quality, compliant valuations are essential to crucial underwriting, re-underwriting, and transaction determinations, which is why we are committed to providing insightful tech-centric services. We leverage cutting-edge technologies that streamline processes and deliver our customers the best possible product.
• Reduce costs by leveraging auto mation and emerging technologies
• Evaluate, monitor, and minimize system and technology risk Modernize your operations
• Deliver greater visibility into loan data, people, and process performance
• Increase user adoption and knowledge
What technologies does Consolidated Analytics use to provide value to its customers? In addition to providing Valuation, BPO, and due diligence services, CA provides tech-centric solutions from digital transformation, process auto mation, road mapping, system selec tion, optimization, and implementa tion. We blend the mortgage industry system and loan workflow expertise with emerging trends, exceptional process design, project management, regulatory knowledge, and learning and development to:
Consolidated Analytics: Continues on pg. 14
Consolidated Analytics provides the real estate finance industry with an end-to-end mortgage services platform that delivers value to its customers, from asset-level analysis to enterprise optimization.
What types of employees are at Consolidated Analytics? How does their experience/expertise fit into your business model? We hire expert practitioners based on their experience and knowledge, ability to bring outside-the-box thinking, and willingness to embrace emerging trends such as automation, AI, and advanced analytics. We hire changemakers who go to great lengths to make client experiences exceptional. Our leadership and management teams are hired for their knowledge, experience, talent, grit, and passion for modernizing processes for the company and its clients. In their day-to-day Consolidated Analytics at a golf tournament
14 Consolidated Analytics: Continued from pg. 13 Mortgage Business Process Services: In an ever-evolving regulatory and technology marketplace, consistently optimizing organizational workflow is necessary to remain competitive. CA offers a full range of business process services that help our clients respond and adapt to emergent trends. As a result, clients can prioritize growth by freeing up key personnel to focus on core competencies, devel opment, and innovation with top-tier support across fulfillment, quality control, and audit and management Consultingprocesses.
& Strategic Advisory: An ingenious strategy means nothing without an effective implementation plan and vice versa. CA bridges the critical gap between planning and execution by employing subject mat ter experts (SMEs) across the full scope of mortgage and financial ser vices disciplines to ensure effective operations, processes, and systems at all project phases. Asset Due Diligence: Designed by the leading authorities in the industry, CA’s due diligence services deliver exceptional trans parency in pre-and post-issuance securitized assets that exceed even the most rigorous demands of indus try regulators, investors, and stake holders. Approved by all ratings agencies, CA's due diligence services help clients assess risk and make the informed loan, portfolio, and transaction decisions. In addition, CA addresses the most stringent regulatory and agency requirements, from securitized assets to MSRs, to HELOCs, through quality control.
Consolidated Analytics team bonding event at Dave and Buster's
What plans do you have for the future of Consolidated Analytics? Any new initiatives/services you would like to highlight? At Consolidated Analytics, our eyes are always on the future. An ongoing focus on mortgage technologies that provide cost-effective value-add to the origination, valuation, capital markets, and servicing products and services we deploy will remain a key development area. Our techcentric focus includes addressing the accessibility of data and information related to loan quality and the lifecycle of the assets. By deploying RPA, AI, and OCR, we continue leveraging technology to create operational efficiency and effectiveness internally and for our clients.
August 2022 Originate Report 15 work, they reflect our core values and remain thoughtful, credible, accountable, and innovative, keeping the momentum high and the results improving consistently. Our multidisciplinary approach en ables you to tap into a range of ex pertise, solutions, and services at a moment's notice. Whether you want to explore alternative disposition strategies, evaluate collateral or loan quality, or improve operational excellence, we provide a complete set of solutions designed to optimize performance within specific func tions or across an enterprise. Our leadership team is experts across the mortgage and financial services spectrum, including origination and servicing operations and processes, technology and AI, risk management, regulatory compliance, appraisal, due diligence, asset management, and rental management. Our teams are carefully composed to ensure ex pertise from the loan level up to the enterprise level for a strategic per spective and meticulous execution. What types of clients do you typically work with? What are the biggest reasons they choose to partner with Consolidated Analytics? Consolidated Analytics has more than 200 active clients, including top money center banks, agencies, credit unions, community banks, non-bank originators, aggregators, and warehouse financing providers, spanning the entire mortgage lifecycle from origination through capital markets and servicing. Clients choose CA because of our leadership and dedication to customer service and transparency. The thoughtful deployment of mortgage services that provide value to our clients and fast turn times are the foundation of success for our clients and their customers. What is the most challenging aspect(s) of delivering the best endproduct to your clients (adjusting to market trends, improvements/competition,technologyetc.)?
For more information, please visit: https://www.consolidatedanalytics.com/
Addressing the cyclical nature of the mortgage market and its need for services that can be deployed quickly and executed effectively has always been a challenge. Consolidated Analytics leverages decades of industry knowledge with an emphasis on technology deployments that allow for quickly scaled operations that are methodical in execution.
16
PROPERTY VALUATIONS F r o m a s s e t l e v e l a n a l y s i s t o e n t e r p r i s e o p t i m i z a t i o n o u r s o l u t i o n s a d d r e s s t h e m o s t s t r i n g e n t r e g u l a t o r , a g e n c y a n d i n d u s t r y r e q u i r e m e n t s t o h e l p y o u r b u s i n e s s t h r i v e .
CONSOLIDATEDABOUT ANALYTICS C o n s o l i d a t e d A n a l y t i c s s e r v e s c l i e n t s i n m o r t g a g e l e n d i n g , s e r v i c i n g a n d c a p i t a l m a r k e t s w i t h a n e n d t o e n d m o r t g a g e s e r v i c e s p l a t f o r m t h a t d e l i v e r s v a l u e f r o m a s s e t l e v e l a n a l y s i s t o e n t e r p r i s e o p t i m i z a t i o n O u r s o l u t i o n s t a p i n t o t h e p o w e r o f d a t a a n d t e c h no l o g y , a n d t h e e x p e r t i n s i g h t s o f o u r t e a m , t o d e l i v e r a c r o s s t h e m o r t g a g e i n d u s t r y , i n c l u d i n g v a l u a t i o n , b u s i n e s s p r o c e s s s e r v i c e s , d u e d i l i g e n c e a n d c o n s u l t i n g L e t C A h e l p y o u u n l o c k l o a n a n d o p e r a t i o n a l q u a l i t y , e f f i c i e n c y , a n d p e r f o r m a n c e C O N T A C T U S consolidatedanalytics.com s a l e s @ c a u s a . c o m
LOAN REVIEW
B u s i n e s s p u r p o s e l o a n s r e q u i r e a d i f f e r e n t a p p r o a c h t o e v a l u a t i n g p r o j e c t s u c c e s s . W e a s s e s s p r i o r p r o j e c t h i s t o r y , v a l u e s , b u d g e t s , r e n t r o l l s , a n d b o r r o w e r / e n t i t y p r o f i l e s t o h e l p d e t e r m i n e p r o j e c t e l i g i b i l i t y f o r i n f o r m e d d e c i s i o n s . O u r C o n s o l i d a t e d V a l u a t i o n S u i t e o f f e r s t r a d i t i o n a l , h y b r i d a n d t e c h e n a b l e d p r o p e r t y v a l u a t i o n p r o d u c t s t o s u p p o r t b u s i n e s s p u r p o s e l e n d i n g . O u r s u i t e o f s o l u t i o n s c o m b i n e c o m p r e h e n s i v e m a r k e t d a t a w i t h t h e e x p e r t i s e o f l o c a l f i e l d a g e n t s a n d l i c e n s e d a p p r a i s e r s .
ORIGINATION FULFILLMENT
W e p r o v i d e b u s i n e s s p r o c e s s s e r v i c e s t o m e e t m a r k e t d e m a n d . O p e r a t i n g a s a n e x t e n s i o n o f y o u r b r a n d , w e f r e e u p r e s o u r c e s f o r b u s i n e s s e s t o f o c u s o n t h e i r c o r e c o m p e t e n c i e s , w h i l e s c a l i n g t o a d a p t t o c h a n g i n g m a r k e t c o n d i t i o n s
INTELLIGENT MORTGAGE SOLUTIONS
August 2022 Originate Report 17 Info@mypl360.com | (619) 391-2523 www.privatelending360.com
BEDROCK THE
Enter The Bedrock Mortgage Fund, a real estate investment fund that constructs short-term, high-equity real estate loans.
18
It seems everywhere you turn, a different group is claiming to ‘revolutionize’ the real estate investment industry. Despite these catchy monikers, few live up to the hype.
By Charles Peckman, Contributing Writer for Originate Report FUND
Getting
By fastidiously targeting a portfolio of high-equity real estate loans, the Fund can provide consistent results for its investor pool. The leadership of the Fund, which has provided backing for more than 2,500 transactions, includes to the Bedrock of Real Estate
Investing
AfterBefore
Founder Mark McKeller, who sat down Originate Report to discuss the elements of the group’s success.
Throughout his 20+ year career, McKeller has owned companies that have secured an impressive book of business: this includes purchasing more than 800 fix and flip properties across nine markets, including 400 rental units, networking with a group of over 1,200 HomeVestors of America Franchisees, and personally originating more than $5 million in assetbacked bridge loans before Bedrock. When thinking about this experience, McKeller said he has seen monumental shifts in the ways borrowers and lenders interact. He added that at the Fund, the leadership strives to implement emerging trends into day-to-day operations. “Back in 2000, when I started, credibility was a huge issue – no one believed that I could walk into a house and make a cash offer with no contingencies. That was such a foreign concept. The mindset was that there was no other option other than dealing with a real estate agent and going through laborious processes and jumping through hoops,” he commented. “At the Fund, we work with our investors to cut the red tape and streamline the financing process.”
Since he started in the space, McKeller said that public-facing components –such as a litany of fix and flip-focused shows on HGTV, paired with internal attributes – like the growing number of private money lenders – have contributed to increased visibility. Although this can be positive, he mentioned that some of the media surrounding real estate sound like a ‘get rich quick’ scheme. A key way around this mindset, McKeller noted, is to establish credibility by fully vetting potential investors. Because the Fund specializes in short-term, high-equity real estate loans, the group only offers financing to a carefully selected group of investors. “There is a reason we have never had a late payment or default,” he stated. “We prioritize the flow of deals through our platform and pay attention to detail during the initial steps of lending. That due diligence is critical.” McKeller explained that the Fund originates commercial residential loans on properties that fall around the median in any given market. In addition to offering a glimpse into the market averages, these properties tend to be
The Bedrock Fund: Continues on pg. 20 August 2022 Originate Report 19
“It is not about being exclusionary, but we wanted to construct an environment with the Fund that was conducive to high ROI.” This emphasis on return, McKeller told us, has been on full display over the past two years. While many lenders struggled through the early days of the COVID-19 pandemic, McKeller expressed that the Fund has been able to retain its lack of late payments and defaults. “It is
the least volatile. As a HomeVestors of America Franchisee, McKeller emphasized that this contingent of investors has a track record of providing safe capital. “We gear our product towards investors who have experience and are in this full-time,” he responded.
Examples of Bedrock Fund's completed projects
20 The Bedrock Fund: Continued from pg. 19
A boutique real estate investment fund specializing in short-term high-equity real estate loans.
August 2022 Originate Report 21
“Everybody needs a place to put their cash, and no one wants something that is risky,” he replied. “But who wants to put their money in a savings account and make 1% interest? I always ask our investors to think about their longterm vs. short-term investments. It will not happen overnight, but we strive to offer safe investment alternatives. Our investments are shorter-term but pay as much as some longer-term investments. Our investors can also get their returns paid monthly if they choose to.” This safety, McKeller claimed, is not just an empty promise. As a verified group by Verivest, the Fund has been fully vetted by the leading due-diligence group in the real estate in dustry. The Fund has no unfavorably re solved litigation, no personal or business bankruptcy petitions, and zero regula tory sanctions or criminal convictions. “We have a steadfast commitment to our investors, and I am proud of the prod ucts we offer. We have a dynamic team in place, and I look forward to watching the fund grow,” he said.
Examples of Bedrock Fund's completed projects
For more information, please visit: https://www.thebedrockfund.com/ about flexibility, and it is about managing market correction. We are in a very hot market right now that has been good to us, but as that begins to slow down, we strategize on how best to pivot,” he answered. “We will not repeat what we saw after the 2008 crisis because we are in a strong financial market.”
Looking forward, McKeller announced that a critical goal remains to grow the amount of capital in the Fund. By offering a higher interest rate than products such as savings accounts or blank CDs, the Fund hopes to entice more investors with loans that provide comparable liquidity to less-profitable investment alternatives.
The Private Lending Dynamic Duo Breshears and Johnson bring over 20 years of successful mortgage lending and real estate investing knowledge to the table. Breshears is a balance sheet lender in Virginia, short-term rental owner, and Certified Fund Manager, who has a personal mission to help others invest passively to live actively. Johnson is a self-described private money matchmaker, landlord, and real estate investor who operates a private money lending business, Flynn Family Lending, with her husband, Matt Flynn. Flynn Family Lending specializes in creative financing in Washington State and whole trust deed investing opportunities for truly private debt investors nationwide. What people may not know about Breshears and Johnson is that they each came
By Mark Dewyea, Contributing Writer for Originate Report
FEATURE ARTICLE
How Lend2Live is democratizing access to Private Lending KnowLedge
22 Knowledge is power. This oft-quoted adage applies to all things, private lending included. In our increasingly digital technology-driven age, the daunting task of sourcing, aggregating, and distilling the quantity of available information is understandably daunting, especially from a relative beginner’s perspective. For many, this initial knowledge base is the most substantial hurdle standing between them and obtaining true financial independence through private lending. That is the exact conundrum Alex Breshears and Beth Pinkley Johnson are planning to address in their upcoming book, Lend to Live: Earn Hassle-Free Passive Income in Real Estate with Private Money Lending, which will be available to purchase through BiggerPockets starting in July 2022. This dynamic duo also facilitates a completely free educational community called Lend2Live: Private Lending Lessons that offer daily discussions about private lending, monthly networking for private lenders, and a connection to resources in the private lending space with plans to expand their offerings to include training and educational opportunities as well as in-person gatherings in con junction with national private lender conferences held annually. Originate Report recently got a chance to sit down with Breshears and Johnson to get an insider’s glance at what went into writing the book and their plans for growing and scaling their wildly popular Lend2Live project.
August 2022 Originate Report 23 Lend2Live: Continues on pg. 24
private money lending without the hardships we experienced,” says Johnson. “Back then, there were not many opportunities to exchange ideas with others doing things the way we Drawingdid.”from their collective two decades of extensive experience in the mortgage lending and real estate investment industries, Breshears and Johnson lay out a viable 5-step strategy called the C.P.R. lending system. It is compatible with just about any lifestyle, builds toward financial autonomy, and allows you to do so without an overwhelming time commitment. Lend to Live uncovers what has long been a trade secret for corporate lending entities and makes it accessible and from a professional background as educators, the former as a chemistry professor and the latter as a leader in corporate learning and development. While both these individuals have had extremely successfully careers to date, perhaps even more impressive is the fact that the pair has only met in person three times over the process of co-authoring Lend to Live and wrote the entire book cover-to-cover in under six months. The publisher had nominal material changes to their original draft, which is a testament to the depth of knowledge and insight these consummate professionals have in the industry. Off the Beaten Path When it comes to real estate investing, most individuals look to acquire properties using borrowed funds, seeking to recoup their debt, and eventually turn a profit. But what if you could turn the tables on this familiar investment approach? What if, instead of borrowing money from the bank, you were the one providing the necessary funds to real estate investors to close their transactions? That is the basic premise behind Lend to Live: Earn Hassle-Free Passive Income in Real Estate with Private Money Lending. Breshears and Johnson have drawn on their professional careers in the investment and lending space, coupled with their background in education, to help beginners navigate the process and avoid some of the most common pitfalls. “I hope our book can help others get started in That is the exact conundrum Alex Breshears and Beth Pinkley Johnson are planning to address in their upcoming book, Lend to Live: Earn Hassle-Free Passive Income in Real Estate with Private Money Lending, which will be available to purchase through BiggerPockets starting in July 2022.
Lend2Live LLC – Co-Founders Beth Pinkley Johnson and Alex Breshears from achievable for the public. “There are plenty of books geared to real estate investors on finding private capital, but very few on placing private capital,” notes Johnson. “That is because private lenders typically do not operate a brick-and-mortar shop. They have busy families and a demanding W2. They are obscure and hard to find—because private lending is not their day job. Alex and I want to teach others what private lending can do for everyday folks and how to do it safely, securely, and confidently.” If that does not sound enticing enough, their strategy can be done from anywhere in the world—all you need is an internet connection and a cell phone.
pg. 23
24 Lend2Live: Continued
Lend2Live: A Complimentary Digital Resource In addition to their upcoming book, the Breshears and Johnson have launched a new online learning community, Lend2Live, that will offer interactive learning initiatives geared towards everyday individuals striving to understand what opportuni ties private lending can offer them. The platform will feature collaborative forums, training programs, and multimedia content to make the information accessible, entertaining, and effective. “There is an informa tion gap when it comes to breaking into the private lending industry,” observes Breshears. “Lend2Live has the overarching goal of democratizing access to the insights and know ledge you need to be successful in the industry and generate sustainable passive income.” Access to the right information is often the pathway to opportunity. Lend2Live and Lend to Live: Earn Hassle-Free Passive Income in Real Estate with Private Money Lending together have the potential to open this path to the general public. At a time where financial autonomy and generating sustainable income are paramount to many families, the pair’s initiative is more important than ever, and if their success thus far in their respective careers is any indication, Lend2Live has a very bright future. For more information, please visit: https://www.lend2live.com/
August 2022 Originate Report 25April MONTH THEME CONTENTS & AD DEADLINE COVER STORIES & FEATURED PIECES ADVERTISEMENTS Lesley Boyd, Senior Vice President of Marketing l.boyd@geracillp.com | submissions@originate.report | (949) 379-2600 www.geracilawfirm.com | www.geracilawfirm.com/originate-report | www.geracicon.com February 2022 June December20222022 Multifamily Lending - SOLD 3rd Annual Women in Real Estate Edition - SOLD Year in Review – Highs and Lows of 2022 - SOLD April August20222022 Innovate Special Edition – Focus on Innovative Companies, People, and Ideas* - SOLD Captivate Special Edition – Focus on Deal Flow and Capital-Raising* - SOLD October 2022 AAPL Special Edition* - SOLD January 10 May November6 5 March 4 July September8 9 *Includes cover **High resolution (300dpi) photos - Include captions; list photos in order of preference; stock photos can be provided by the designer Themes are subject to change. *Conference-Specific Issues. The AAPL Special Edition will be included in tote bags at the event. Conference-Specific Cover Stories* • 2500-3000-word article written by an Originate Report staff writer • Cover story company to provide 5-10 photos for use with article** • Cover story company to provide a full page ad to be in the following edition • 25 printed copies for Cover Story subject • Printed Copies prominently displayed at Innovate, Captivate, or in the bags at AAPL depending on issue Non-Conference Specific Cover Stories • 2500-3000-word article written by Originate Report staff writer • Cover story company to provide 5-10 photos for use with article** • Cover story company to provide a full page ad to be in the following edition • 25 printed copies for Cover Story subject • Some printed copies may be made available at conferences including CMA, Captivate, CREF, AAPL Featured Pieces Both conference and general cover story • 750-1000-word article written by Originate Report staff writer • Story company to provide 3-6 photos for use with article** UPCOMING ISSUES 2022 *Advertisement pricing includes graphic designer working with you to create the ad. Take 10% off if you provide the file to use in our publication. Originate Report magazine is distributed through print and digital channels to thousands of loan originators, lenders, investors, and other professionals in the non-conventional lending industry. It has become an essential resource for its au dience, providing valuable and timely content with each edition to help readers stay up-to-date on current industry trends and grow their businesses. Originate Report also provides a platform for professionals in the lending space to promote their services through advertisements. Please reach out for pricing and opportunities. Full Page: 8.5” x 11” + .25" bleed + .5” margins on all four sides | Half Page: 8.5” x 5.5” | Quarter Page: 4.25” x 5.5” June
Consistency and reliability are two sought-after attributes for savvy inves tors looking for a long-term lending part ner. Access to capital is key to profitable investment operations. Arguably just as important is efficiency, and Constructive Capital certainly has that requirement covered as well. “One of the hallmarks
SUSTAINABLE
LENDING PRACTICES
BUILDINGSPONSOR
Fortunately, Constructive Capital can maintain consistent access to cash flow, allowing them to weather market insta bility considerably easier than competi tors. As Concannon explains: “Lenders that work with Constructive Capital benefit from our reliable partnership with one of the largest life insurance bal ance sheets in the country, Constructive Insurance. Borrowers can count on our consistency, best-in-class execution, and competitive rates.”
Market Volatility Trending Upwards— Not a Problem for Constructive Capital It is safe to say that the economy has been anything but stable over the past few months. “The securitization market for DSCR loans has been extremely illiquid and volatile since beginning of this year,” notes Kyle Concannon, Senior Director of Business Development at Constructive Capital. “This has resulted in lenders slowing down or shutting down completely, and many re-trading rates and loan terms for loans in process, sometimes right before their closing.”
26 If you had to analogize the role of private lenders in the real estate investment industry to an example in nature, you could compare them to bumble bees—the only discernable difference being that instead of spreading pollen to nourish blooming flowers, lenders distribute capital to similarly facilitate the growth of investment operations. Extending this analogy allows the logical inferences to be drawn that if there was no pollen, there would be no flowers, and if there was no capital, the investment sector would grind to a comparably screeching halt. This principle underscores the criticali ty of liquidity—the availability of liquid assets to a given entity. And while the Federal Reserve and Congress have re cently implemented several initiatives to enhance liquidity for businesses and individuals alike amidst the developing COVID-19 situation so that the economy can continue functioning during an ex tended downward trend, several lending firms have found it increasingly difficult to maintain optimal liquidity to sustain lending operations. Much in the same way real estate owners and investors must have the liquidity to meet their financial obligations, banks and private money lenders alike also have specific reserve requirements they must maintain to do business. Originate Report recently had the pleasure to sit down with the leadership team of Constructive Capital, a leading capital provider for business purpose DSCR rental loans, to learn more about their approach to sustainable lending practices and how they are adjusting to the evolving economic conditions.
By Mark Dewyea, Contributing Writer for Originate Report
GOLD
For more information, please visit: https://www.constructiveloans.com/
Alex Offutt, Managing Director Ben Fertig, President Robert Kang, Senior Director Tess Siwa, SVP, Operations of working with Constructive is speed. And when we say we can close your loan in 2 weeks or less we mean it,” says Alex Offutt, Managing Director of Constructive Capital. “That is one reason why brokers and investors love working with us. It is not just because we have simplified the process but also because our team mates know exactly what brokers need so they can get funding for their client’s residential real estate investment proj ects as quickly as possible. That is the Constructive Advantage.” The ability to continue successful lending operations in a less-than-ideal economic environment is a testament to the organizational quality of Constructive Capital. “The unprecedented turbulence in the mortgage market coupled with the tepid economic outlook has caused a great deal of pain for many market participants,” states Robert Kang, Senior Director of Constructive Capital. “However, credit crunches like this are an inevitable aspect of this business over the long term and the current environment is necessary to clear out unhealthy participants with unsustainable business practices. Our success in the BPL mortgage industry is largely attributable to the quality of our investors and their faith in Constructive. Our loan quality and resulting loan performance have built trust between investors and Constructive.” Benn Jackson, Senior Director of Business Development at Constructive, succinct ly captures why Constructive Capital is the talk of the town within the private lending industry of late: “Constructive has been able to thrive while others try to survive.” Offutt echoes this sentiment, and mentions that “Constructive has al ways been at the tip of spear in the BPL industry when it comes to consistency and stability. We have grown in the last few months as others have fallen off, and it is our continuing mission to provide best in class pricing, product, and execu tion through these dynamic times.”
August 2022 Originate Report 27
PRIVATETITANSLENDINGSteveTrowern Co-Founder and Managing Partner, MCM Capital Partners/Temple View Capital PRIVATE LENDING TITANS
Q: Can you explain a time where you faced adversity or had struggles early on in your career? Where did it all begin? How did these experiences mold and shape you into the leader you are today? When have we not faced adversity? Since founding MCM in 2007, we have faced a global financial meltdown, periods of incredible market volatility, and a global pandemic. Each of these, however, has made us stronger. You must prepare for the 100year event as though it will happen this year, and often does.
August 2022 Originate Report 29
Steve Trowern:
Q: What excites you about your role today? We meet and approve every single candidate before hiring. That fosters a small, close-knit family environment that makes coming into a physical office fun and interesting.
Continues on pg. 30
Q: What is your current role and what do you do day to day? My partner and I oversee the entire MCM platform, including our BPL originator, Temple View Capital. That includes all major decisions, relations with our investors and credit providers, ensuring the integrity of our capital structure, product design and pricing, and policies and procedures.
Q: Is there anything that you wish you could go back and tell yourself at the beginning of your career? I spent the first half of my career working for large institutions. In hindsight, I wish I had transitioned into being an entrepreneur sooner. There is no better bet than betting on yourself. Q: Who is someone that has had a significant effect on your career and why? I had a managing director I worked for early on in my career. He was a very unlikeable character – we called him Niedermeyer after the Animal House character who was killed by his own troops in Vietnam. However, he was a magnificent teacher. Attention to detail is as important as vision and the difference between great and extraordinary is only 10% more effort. Always put in the final 10%.
Q: Why did you choose Private Lending? I have spent the last 20 years exploring opportunities where markets are dislocated or where traditional market participants, in this case, banks, are not adequately addressing the market’s needs. “Private Lending” is an antiquated term as the sector has become more institutionalized. Nonbank Investor Financing is probably a more appropriate reflection of the sector today.
Q: What has been your favorite aspect of being in private lending over the years? I would say creating new prod ucts and developing innovative solutions to our clients’ prob lems. Regular mortgage banking has Fannie and Freddie to rely
Steve Trowern Co-Founder and Managing Partner
MCM Capital Partners/Temple View Capital
For more information, please visit: https://www.templeviewcap.com/ on for liquidity and standards. Private lending, or what should be called Nonbank Investor Financing, has been made up as we have gone along. That is just more interesting.
Q: What would you consider to be the highlight of your career thus far? The fact that we are one of the only, perhaps the only, toptier private lender who remains independent. That may not always be the case but building Temple View from scratch, without the support of a sponsor, is our proudest accomplishment.
Q: What do you enjoy most about your job? Least? I enjoy the daily challenge of having to adjust our sails and tack to stay ahead of our peers. I do not particularly enjoy the impact of events that are out of our control, such as inflation, wars, and dislocations in credit markets. In times of market volatility, it is easy to forget that our customers are the ones really creating value by taking old housing stock and making it new again. It is not a trade for most of them. They are professional investors and will keep going whether rates rise or fall. It is a calling for many of them.
Q: How do you make sure your company stays ahead in this industry? It is difficult to predict with any degree of certainty in this industry, so you need to be flexible enough to adjust quickly to changing conditions. We do not get too attached to one way of doing things.
Q: What tools do you use to aid you in your role to be most efficient, organized, and focused? Information and communication are key. I have a wide range of contacts from the fixed income community to contractors on the ground. Listen to everyone, embrace new ways of doing things, and be self-critical. It is constant evolution. Q: Has your role changed significantly to address the current environment? I am certainly spending more time on capital, pricing, and li quidity considering recent mar ket conditions. However, the role will change again just as quickly.
I spent the first half of my career work ing for large institutions. In hindsight, I wish I had transitioned into being an entrepreneur sooner. There is no better bet than betting on yourself.
30 Steve Trowern: Continued from pg. 29
There is always something on the horizon. Q: What advice would you give to someone who has just started out in private lending? Build bridges, work with people you like, and do not single source anything, particularly capital or financing. Q: How will private lending change to adapt to the current market trends? We are starting to see fundamental changes in the market already. The business has significant exposure to the securitization market, particularly among the aggregators, and that has brought some serious challenges to the gain-on-sale originators. I think we will see a shift to balance sheet lenders and some consolidation in the industry. Over the longer term, traditional residential mortgage platforms will look to diversify product offerings by acquiring BPL lenders. They are much easier to buy than to create in-house.
Q: Is time or money more valuable and why? Well, it is difficult to deposit time into your bank account, but time is more valuable. It is finite for all of us. Money is not.
August 2022 Originate Report 31April GERACI LLP PRESENTS SEASON THREE - OUT NOW! The Podcast that Looks Behind the Curtain of the Private Lending Industry CATCH US ON THE 2ND AND 4TH MONDAYS OF EVERY MONTH https://geracilawfirm.com/lender-lounge/
Originate Report recently had the pleasure of connecting with Dana Georgiou, SVP, Lender Partnerships at AlphaFlow, to get a firsthand account of what went into developing the unique approach in private lending, and how it is working to consistently improve its processes to deliver a better end-product to its clients.
What was the inspiration for the start of AlphaFlow? It was really two-fold: --first, in "unlocking the world's opaque market,” meaning what could we do to help connect the main street lender to Wall Street capital, and second, how could we do that through dynamic technology and data analytics that allowed for not only ease of use, but transparency to our client partners and our buying/investor partners. The original buyers of loans for purchase came through a retail accredited investment base of individuals that could fractionally buy in the RE investment market space known as Titan. This has now evolved to all loans meeting our buying criteria being sold to large institutional investors. the Power of Technology to Connect Main Street & Wall Street
Corporate slogans are a dime a dozen but often fail to accurately capture the purpose of a business. Therefore, it is refreshing to come across organizations with a clearly defined mission that is fully committed to achieving it, which is exactly the case with AlphaFlow. This dynamic tech-centric company is making waves in the industry, starting with its commitment to being the most reliable capital provider so investors can increase their loan volumes and maximize profitability. AlphaFlow empowers its Lender Partners to take full control of their business via cutting-edge technology and a user-friendly online platform where they can fuse fragmented documents, data, and processes into a single platform. Once a Lender Partner’s loans are submitted, they can track their loan status from submission to purchase with AlphaFlow while referencing detailed financial, property, and market characteristics integral to the underwriting process. This unprecedented level of transparency, instantaneous feedback, and open channels of communication between AlphaFlow and its Lender Partners results in a streamlined buying process that provides partners with enviable flexibility when it comes to accessing the capital they need to grow and scale their businesses.
AlphaFlow
AlphaFlow's Sales Team in Austin TX
By Mark Dewyea, Contributing Writer for Originate Report
GOLD LeveragingSPONSOR
32
August 2022 Originate Report 33
AlphaFlow's Executive Team in Lake Tahoe creates dynamic ease for our partners but a sense of security with sensitive data information. What plans does AlphaFlow have for the future as far as growing and scaling its business? AlphaFlow is always looking at enhancing our technology to drive better ease of use and analytics for our partners and programs. We will soon be launching our Credit Facility that will give the private lending community access to fixed and committed capital to help stabilize and grow their business in a time where uncertainty in capital has become more of a norm than ever before.
What makes AlphaFlow unique? Transparency and speed. In other words, our Lender platform allows our partners to individually place a loan for trade or an entire loan tape and have an instant response of whether it fits our buying box. Once they submit that deal or tape, underwriting is happening simultaneously to the documents as provided, giving real-time feedback to our partners via the technology platform of any deficiencies or information needed. Additionally, we offer a "pre-purchase" review, which gives a Lender Partner confidence that if they meet all the criteria as outlined in that review, AlphaFlow will be able to trade that deal. How does AlphaFlow ensure reliable access to capital for its clients? We are constantly working on new capital sources. This not only allows for enhanced buying power, but each buyer may also have different buying criteria. The programs we use allow us to have as wide of a potential for securing business with our individual lender partners as possible. What loan factors does your proprietary analytics system focus on to determine which loans to purchase? Our technology platform has a loan sizer that incorporates the major parameters of our buying box. A loan would immediately receive flag feedback if it exceeded or did not meet the eligibility criteria.
When reviewing the loan collateral file, what are important details you address with potential clients? As with most loan buyers, the experi ence and liquidity of a borrower are paramount. Additionally, analyzing the actual collateral/property of the loan along with the exit strategy is crucial. How have you integrated technology to aid lenders in their business operations? What features in your online platform are particularly useful and how did you develop them? Many loan buyers are "tech-enabled,” but AlphaFlow is a technology com pany that offers loan buying as one of our revenue verticals. From being able to do a single asset, to a large portfolio tape, the instant response of buying criteria and uploading doc uments within the portal not only
For more information, please visit: https://www.alphaflow.com/
No-Strings Attached Growth Capital Small to mid-sized business (SMB) owners pour their heart and souls into their organizations. That sacrifice is not lost on Meriwether Capital Group. “These business
HeroCapital’sGroupMeriwetherFund
Today’s market is primed for new business ventures to meet the growing demand for solutions to novel issues across all industries. The data backs it up, with over 5.4 million new business applications in 2021, an increase of more than one million in just one year. Prompted by a widespread desire amongst the national workforce for purpose-oriented careers, the great resignation has fueled the next generation of business founders. Although the spread of crowdfunding and other capital aggregators has provided new business owners with the resources to initially launching their businesses, as they garner traction, they often encounter significant roadblocks when it comes to locking in essential growth capital needed to sustain their business models for the long-term. That is where Meriwether Group Capital’s new Hero Fund comes into play. The groundbreaking initiative was launched by Jamie Shulman and Mike Ferguson, who have nearly 50 years of industry experience between them, to provide muchneeded growth capital to lower middle market business entities to empower their leaders to grow and scale their organizations. The fund offers innovative debt solutions to democratize access to growth capital for entrepreneurs seeking to capitalize on key market opportunities and achieve their full potential—all while retaining equity and control over their organizations. The newly formed Meriwether Group Capital operates in partnership with the established entity Meriwether Group, a 20-year Portland firm that has garnered a reputation for outstanding accelerator and advisory services and has supported well-known local companies like Voodoo Doughnut, Dave’s Killer Bread, Stumptown Coffee, Alpenrose Dairy, and many other successful PNW brands. Through the Hero Fund, Shulman and Ferguson hope to continue stimulating the growth of the local economy and eventually expand entrepreneurs’ access to capital beyond the region. “The opportunity to help businesses scale, hire more people, and build community while, at the same time, providing meaningful market returns to our investors, makes the Hero Fund an important offering,” notes Shulman. Originate Report recently had the pleasure of sitting down with this dynamic duo to get an insider’s perspective on the motivation behind launching the Hero Fund and what they hope to accomplish with their latest venture.
34 By Mark Dewyea, Contributing Writer for Originate Report FEATURE ARTICLE
BOOSTING ENTREPRENEURIALSUSTAINABLEGROWTH
Every lender has a unique under writing methodology. Traditional banks focus almost exclusively on quantitative metrics, premising their decision primarily on cash flow, fi nancials, and credit history. The two believe a more balanced approach— one that factors in both quantita tive and qualitative data—is the most effective approach regardless of the current state of the economy. “Even during periods of econom ic recession, we have the resources and experience to fill the gap left by banks,” explains Ferguson. “If it is a good loan, we will make it happen. We take a wholistic view of poten tial borrowers by getting to know the management team. We invest a lot in character—there is more to successful businesses than just the numbers.”
owners essentially have two ways to access capital: equity or debt,” Ferguson explains. “Forfeiting equity is the most expensive approach to raising capital as it is dilutive to ownership. The Hero Fund offers a non-dilutive and efficient alternative debt solution that allows borrowers to maintain ownership of their businesses while accessing the capital they need.”
This relationship-based approach to vetting borrowers is indicative of Meriwether Group Capital’s overarching mission: to support the true heroes of the economy—the innovators and creators who are actively working to address emergent market needs. The pair adopts a similar approach when choosing investors for the Hero Fund. “We want to develop mutually beneficial relationships with our investor base and grow at a pace to fully deploy their funds and optimize returns,” says Shulman. “The majority of our investors have a strong desire to support the small businesses in their local communities where they live— helping to sustain and invigorate the local economy.”
For more information, please visit: https://meriwethergroupcapital.com/
The Hero Fund supplies capital needs outside the criteria of traditional lending organizations. Shulman and Ferguson identified a sizeable funding gap in the marketplace spanning across a diverse collection of major industries. Emergent business entities in these sectors are commonly unable to obtain entrepreneurial debt from valueadded lenders that is necessary for them to grow. “I have seen countless companies walk out the door with a need and a strong business case for borrowing alongside a clear path to satisfying the debt that are just outside traditional banks’ mandate for lending,” observes Shulman. “We know there is an underserved niche with demand for the lending we offer, along with a great deal of investor interest. At a time when entrepreneurship is more accessible than ever before, we want to be able to fill a need, help foster small businesses, and be an economic drive for the Pacific Northwest and beyond.” The fund invests in lower middle market businesses, primarily located in—but not limited to—the Pacific Northwest region that have annual median revenues ranging from $2 million and $75 million, EBITDA of at least $250,000, and borrowing requirements between $500,000 and $5 million. Borrowers use the capital for a wide variety of uses, such as supporting organic growth, funding acquisitions or management buyouts, making capital investments, and refinancing additional outstanding debts or bridging working capital gaps while raising equity. “They can essentially take the capital we provide them and convert it into a much higher level of gross revenue— hire more people or add investments to their facilities,” notes Schulman. Beyond Financials: A Philosophical Approach to Underwriting
Mike Ferguson Co-Founder & Fund Manager Meriwether Group Capital Jamie Shulman Co-Founder & Fund Manager Meriwether Group Capital
August 2022 Originate Report 35
Managing Director, American Association of Private Lenders
Linda Hyde
PRIVATE LENDING TRAILBLAZERS TRAILBLAZERS
Continues on pg. 38
August 2022 Originate Report 37
Q: How do your contributions affect your company at large? It all starts with a vision. Starting at ground level has given me insight from multiple perspectives that oth ers would not have. Seeing this vi sion come to life is so rewarding, but there is still so much work to do. My Linda Hyde Managing Director American Association of Private Lenders
Q: Where did you get your start? My professional career began in a call center, and I have taken the skills I learned from that job and im plemented them into the daily pro cess of AAPL. I believe you use skills acquired at various points in each phase of your life. When I first start ed, I was new to the Private Lending arena, but with years of experience and a plethora of relationships built, we are servicing the private lend ing space better than ever before. I would say that my ‘start’ is what has led to our success. From day one, I have made it a priority to listen to our members and make sure that AAPL as an organization has their best interest at heart.
Linda Hyde:
Q: How many years have you been in Private Lending and why did you enter this field? I went in for an interview after my call center had been closed. I was hired in October 2011 and placed in AAPL with the intention of moving to another company within the group. As I began working with AAPL cli ents and members, I grew passion ate about the industry. The relation ships that I began to foster mattered, and I was committed to seeing AAPL reach its full potential. 11 years later, I am running an organization with a culture that I helped create.
Q: What do you do for your firm? My title is Managing Director, but I do much more than can fit into that title, as do many on my team. I be came a part of the AAPL team in its early days. I had the opportunity to listen to the members and get to know them and what they value in an association. Juggling the various roles within our organization has al lowed me to see where our opportu nities lie and work with my team to make sure we are the best represen tation for the Private Lending com munity. It truly is an honor to see how far we have come, and I am ex cited for the future of APPL.
Q: What is something most peo ple don’t know about you or your company? Most do not realize we are a small but mighty team of three, and for the past few years it has only been two of us making everything happen. The AAPL team is not just about cre ating a better conference each year. We work daily on different initia tives that have a direct impact on the lending industry at large.
38 Linda Hyde: Continued from pg. 37 team is small but mighty, and they share the same passion and vision that I do. I like to think of each team member as a puzzle piece; we all need to connect to bring the vision to light. I play an instrumental part in making sure AAPL stays on course because I am the one that has my fin ger on the pulse of our membership. Our members know me, and I know them. That is how we can be a true representation of our membership.
Q: What does success look like for you? We celebrate our small wins but con tinue to strive for the overall goal of elevating the industry through ethics, education, and legislative ef forts. Knowing that I am a part of this progression in our industry and can leave a mark equivalates to suc cess for me.
AAPL is committed to being the voice for Private Lenders and pro viding resources to support our members no matter what. Regardless of market conditions, lenders need to feel supported and that we are advocating on their behalf. Our job each day is to make the lending space a more credible industry.
Q: How have you seen your com pany grow despite current market conditions? AAPL has seen steady growth, which I believe is partly because of mar ket conditions and partly because of our desire and ability to support and want to better the industry. AAPL is committed to being the voice for Pri vate Lenders and providing resourc es to support our members no matter what. Regardless of market condi tions, lenders need to feel supported and that we are advocating on their behalf. Our job each day is to make the lending space a more credible in dustry.
Q: What are some of your goals for 2022 and beyond? I try to set a few strong goals for the year and then build contributors to meeting those. For 2022, my goal was to get into a position to afford an additional employee, and in May, we were able to bring on a new team member that fits nicely into our lit tle puzzle. We have goals of adding to the education platform, grow ing resources, partner relationships, and increasing membership. We have seen success in all of these. The con ference has its own set of goals, and we have grown year after year thanks to the support of our many members.
Q: What steps are you or your company taking today to make an impact on the industry? Where do I begin? We are taking on legislation that will negatively impact our industry head-on. It is empowering to know that AAPL is making a positive impact on the in dustry by tackling major issues. Our legislative efforts truly set us apart. We have seen success in preventing legislation from passing that would create barriers and be our industry’s demise. By fostering our relation ships with our trusted partners and those in legislative offices, we will continue to let our member’s voic es be heard and ensure the Private Lending industry is represented. We are also continuing to build out AAPL’s online educational platform and making significant changes to the Code of Ethics, ensuring all are treated equally, fairly, and equita bly. Our intention is always for the betterment of the industry and our members. That drives the path we take every day.
Q: What piece of advice did you personally receive early in your career that has helped shaped deci sions you’ve made?
Q: Are you involved in any associations, networking groups, or the like that have influenced your career path? The most recent group that I am proud to be a part of is the Women in Private Lending (WIPL). It feels great to stand next to some of the smartest, strongest, most confi dent women in the industry, and I feel lucky to call many of them my friends. It is widely known that the Lending Industry is a male-dominat ed industry, and this group of ladies shows the power that women have in this space. The impact the group has made in such a short time has been incredible and appreciated.
The best career advice I received was to find a mentor that I could trust. I have had a few in my life, and they have been instrumental in my career growth and have assisted me by pro viding valuable advice to keep me motivated in tough times. One of my long-time mentors is on my current team, and he keeps me grounded.
Q: Tell us about a person or organization you admire. How have they made an important impact on you, the industry, or the world? The lending industry is male domi nated as we all know, but there are so many strong women in this space leading successful teams, and many of them have had a direct influence on my career. One most influential people who has impacted me is Ruth Bader Ginsburg. One of her famous quotes that resonated with me is: "Whatever you choose to do, leave tracks. That means do not just do it for yourself. You will want to leave the world a little better for your hav ing lived." I now have educated my own daughter and the path Ginsburg has blazed for women so she knows she can do whatever she puts her mind to as a young woman in this ever-changing world.
Q: If you had a clean slate to start over and do anything you wanted to do, what would that be? I used to want to be a doctor, but that path did not work out. Then, I decided I would be a great attor ney because of my love to argue and get my point across, but that is well past, too. Something in pho tography would be fun as well. I do know I need something that offers the flexibility I have now because I have grown to appreciate how this job allows me to balance work with my family. I love being a leader and having a great team, so I would not give that up for anything right now.
August 2022 Originate Report 39
For more information, please visit: https://aaplonline.com/
Q: What is the best advice you could give someone thinking about mak ing a leap into Private Lending? Listen to what those around you are saying, talk to peers and cus tomers before acting, and presume you know the least. I would give the same advice I received: find a trust ed organization or mentor to pro vide resources to help you grow and be successful. I believe this world is full of more good than bad, and most people genuinely want to help you. Private Lending might sound very scary and can be if you do not have the right information. Connect and build relationships with those doing the business so you can learn about common pitfalls and be steps ahead of others.
40 Successfully navigating ex treme market fluctuations stemming from unprece dented global events is no small feat. Doing it twice is downright impressive. Flexibility coupled with innovation lies at the heart of everything that Eric Abramovich and the team at Roc Capital do to continue growing and scaling their company even when conditions are far from ideal. Originate Report went straight to the source to get an insider’s view of the company’s unique business model and how it allowed them to thrive in even the most challenging times—ranging from the dynamic environment of the initial COVID-19 pandemic to the current environment in the real estate and lending industries. GOLD SPONSOR
By Mark Dewyea, Contributing Writer for Originate Report
ROC CAPITAL A Masterclass in Sustainable Lending
Eric Abramovich Co-Founder and Chief Credit Officer, Roc Capital
on pg. 42
Roc Capital’s founders’ experience in capital markets, diversified capital, and focus on managing risk have them strongly positioned to work with originators to create new lending opportunities and continuing to lend in a period of dislocation. Their white label table funding business model is appealing because it protects originators from the severe market moves that are currently playing out while protecting their brand identity.
The global pandemic surprisingly functioned as an accelerant for Roc Capital’s business initiations, driving fundamental shifts in where and how the company invests and lends in a collective effort to deliver the best endproduct to the customer. It has been a landmark developmental phase for Roc Capital. At a time when most lenders were forced to pause or completely shut down operations altogether, Abramovich and his team closed a record number of loans, started a title company and AMC, and released a cutting-edge white label portal which is now widely available, in service of the 360 concept for their growing list of satisfied clients. Roc Capital also significantly expanded their product offerings, primarily on the DSCR side, and now have a full range of short-to-longterm loans that cover all housing from single family to condos to multifamily buildings.
Instilling Organizational Stability Dependable access to stable cap ital is an essential component of sustainable lending. Issues arise, however, when organizations are overly reliant on leverage to meet return target thresholds and lack a sufficiently diversified group of investors. Abramovich and the other co-founders recognized early on how essential this con cept is to long-term viability and structured the business model accordingly. “We are always pre occupied about mitigating risk whenever possible and building in organizational practices such as expanded access to unleveraged capital has allowed us to be flexible even in a dislocated market,” he says. This proactive approach allowed Roc Capital to continue lending operations amidst the fallout of the COVID-19 pandemic and allowed them to adapt to the current evolving marketplace.
August 2022 Originate Report 41
Abramovich explains how the company maintained consistent access to unleveraged funds to set themselves apart from the competition: “We did not have any margin calls. We were unlevered. We had committed insurance capital entirely insulated from the rampant market volatility that enabled us to not just see the crisis through—but continue delivering optimal results for our client base.”
Roc Capital: Continues Co-founders, leadership, and board members at Roc Capital
This team-centered environment has been a key driving force behind Roc Capital’s exponential growth into one of the premier lending organizations today. The leadership team has implemented a unique approach to foster a tight-knit, collaborative workplace. “We essentially have a flat organization,” Abramovich states. “We all sit together in a trading floor type of setup.
It is hard to overstate the impor tance of a thorough data analysis protocol when making informed business decisions. Objective statistical information is a powerful tool utilized to gain a powerful competitive edge by enhancing the effectiveness of loan products and providing more accurate insights to clientele who depend on experienced professionals to provide actionable insights and advice. “First and foremost, we are a data sciencedriven company. We have many full-time, highly qualified data scientists on staff whose sole responsibility is interpreting market data and translating it into useful insights,” Abramovich explains. “I believe where we add value most for our clients using this data-centric approach is first accurately forecasting the inherent risk profile of a given transaction and then use that information to create new products that assist our originators with their daily tasks—whether that is generating more leads, increasing their workflow to be more efficient, or handling more of their administrative processes.”
One thing is for sure: whatever Roc Capital is doing, it is producing consistent results. The future is bright for Roc Capital as they plan to continue to consistently integrate technology into their business model to enhance client experience while leading with a steady hand. Roc Capital will remain consistent and reliable throughout these headwinds.
Corporate Culture Breeds Success Abramovich prides himself on playing a largely hands-on role in the day-to-day operations at Roc Capital. “We are a 100% employee-owned company, and the founders are always around,” he emphasizes. “My fellow founders and I are obsessed with completing each transaction as smoothly and efficiently as possible for the client. Our clients know that, and we ensure they get the best service possible.”
Eric Abramovich Co-Founder and Chief Credit Officer, Roc Capital
42
Nobody has a private office; it is a highly collaborative endeavor.”
Roc Capital: Continued from pg. 41
For more information, please visit: https://roccapital.com/ Data-Driven Risk Mitigation
August 2022 Originate Report 43
Futures Financial's Team (Left to right): Kendra Rommel, Principal/Co-Founder; Jacqui Henderson, Junior Processor; Janet Nilsson, VP Investor Relations; Justin Harrison, Senior Account Executive; Leslie Grant, VP Operations; David Rosenberg, Principal/Co-Founder
Rommel, who started her career as a loan officer for Coast Security Mortgage at 17-years-old, has
By Charles Peckman, Contributing Writer for Originate Report
Real Estate Investment, Evolved 44
Rommel and Rosenberg sat down with Originate Report to discuss how the group strives to deliver conciergebased, quick-to-close solutions, consistent quality performance, and trusted fund management with a variety of business purpose products.
In a crowded marketplace where both new and established businesses compete for clients and premium advertising space, what does it take to run a business that rises above the fray? Enter Kendra Rommel and David Rosenberg, industry veterans who co-founded Futures Financial. Headquartered in Tustin, California, Futures is a private money lender backed by private wealth that draws on its founders’ combined three decades of knowledge and experience in lending, asset management, fund management, and capital markets.
FEATURE ARTICLE
This transparency begins before the proverbial (or literal) shovel meets the dirt. “As far as the external communications to borrowers go, everyone seems to think that they have the best deal, quickest crew, and everything figured out,” Rosenberg explained. “It is important to listen, first and foremost, but given the many factors that go into the timeline and associated costs for a project, it is important to be a resource. You do not want to skew negative but setting expectations can save a lot of headaches and wasted resources down the road.” Rosenberg takes special pride in moving draws and/or opportunities along, quickly utilizing his extensive knowledge and experience in construction. worked as an operations manager, funder, post closer, and processor throughout California. For the last decade, she has created a nononsense, honest reputation through her consistent top performance in asset management and the private lending space. Rosenberg started his career at Countrywide Home Loans, averaging over $10 million in monthly transactions. He has since built a credible reputation for raising and maintaining capital of private wealth individuals in and around Southern California, demonstrating a strong performance and track record of close to zero defaults and 100% capital returned at committed targets or higher. “David and I have been friends for several years, and our synergy started as a friendship instead of doing substantial business together. I sank my teeth into the idea that David and I could change how private lending is done. We knew we could dominate with our divergent backgrounds, so Futures was born,” Rommel said. When thinking about the building blocks that comprise a successful venture – and drawing upon previous experience with products such as bridge loans, ground-up construction, and long-term loans – Rosenberg told us it is difficult to underestimate the value of a highfunctioning operations team. “We are still very boutique and very hands-on, and that comes with starting a new venture,” Rosenberg stated. “We are physically calling our clients once they close to confirm they have the adequate information to manage their draws and make repayment. That is just one example. But from day one, our core group has been capable of pushing files through, executing with urgency, and growing Futures.” This core group, Rosenberg noted, has allowed Futures to set itself apart from the crowded lending space. “Another aspect that sets us apart is our steadfast interest in aligning with the borrower,” he emphasized. “We want to see the borrower succeed, and that comes with involving ourselves in every step of the process. One of the most talked about topics right now is differentiating yourself in this market and navigating shifts in the playing field. Our focus on white glove service has already created a distinct image of the Futures brand.”
August 2022 Originate Report 45
Likewise, Rommel mentioned: “We have been able to secure great capital partnerships coupled with a fantastic client base. What those partnerships do is allow us to show up as the best versions of ourselves. Understand ing the objectives and the expected deliverables of our capital partners, our internal teammates, and our broker or retail partners enables us to tackle each day with a clear vision and the opportunity to act and exe cute in a way that exemplifies our core values.”
Futures Financial: Continues on pg. 46 track record of doing what you say you will do, transparency when communicating, and delivering what people expect or more.”
Rommel and Rosenberg agreed that there is no replacement for truly putting in the work to build a credible reputation. “To me, credibility boils down to being transparent and honest with everyone,” Rosenberg explained. “Trust builds on your
Futures Financial: Continued from pg. 45
In terms of business model, Rommel and Rosenberg infused a progressive approach by employing a two-pronged capital structure. Boasting both origination and asset management platforms, the team can pivot quickly between the two in response to the ever-changing market. This is good news for their internal and external clients because, in challenging times, Futures can maintain production and profitability, further building their reputation in the industry as a reputable and trustworthy private money lender. What lies ahead for Futures? “Hard work, grit, discipline, consistent persistence, growing partnerships, many thank you’s, and lots of gratitude and prayers,” Rommel answered. “Between the two of us and our team’s individual strengths, we have created Futures to be a completely robust and diverse lending platform, creating the best user experience externally and within our team. The market is changing, and Futures knows how to work within these changes efficiently and effectively with client satisfaction as their top priority, truly embodying exemplary service.” Both co-founders agreed on one fact: their partnership, along with a growing, talented crew, will lead to the continued success of their Futuresbrainchild.Financial offers services that include bridge loans, fix and flip loans, ground-up construction, and DSCRs. If you would like to learn more about the Futures team and the services offered by the group, visit futuresfinancial.com. If you are interested in being part of the growing team or want to know more about their loan programs, contact info@futuresfinancial.com. For inquiries about investment opportunities, contact at invest@futuresfinancial.com. Futures Financial's Co-Founders David Rosenberg and Kendra Rommel Trust builds on your track record of doing what you say you will do, transparency when communicating, and delivering what people expect or more. 46 For more information, please visit: https://www.futuresfinancial.com/
August 2022 Originate Report 47 AUGUST 21-23, 2022 ENCORE AT WYNN • LAS VEGAS, NV 2022 CONFERENCE CAPTIVATE Thank You to Our Captivate 2022 GOLD SPONSORS geracicon.com
Another key to the success of Precision, Crain revealed, is to look at ways to automate and map items into a system that assists borrowers throughout every step of the process.
NavigatingSPONSOR a Changing Lending Landscape PRECISION CAPITAL
By Charles Peckman, Contributing Writer for Originate Report
GOLD
48 For Mariska Crain, the Director of Lending for Precision Capital, every day serves as an opportunity to survey how the lending landscape is changing – and how she can find new loan products for Precision’s clients. With over 20 years of experience in the lending industry, Crain began her career in subprime wholesale mortgages. Her experience has ranged from wholesale, retail, subprime, and conventional mortgage lending, and she sat down with Originate Report to discuss how Precision Capital navigates the complexities of the market. Despite the fast-paced nature of lending, Crain said Precision Capital strives to cut through the noise – without cutting corners in the name of expediency. “We aim for fast service, but fast service that is not done at the expense of the client,” she emphasized. “One of our main focuses is how do we put our money where our mouth is, and how do we simplify processes to accomplish this goal?”
One analogy Crain offered was the grocery delivery service Instacart. While it may not be the cheapest way to get groceries, she stated, the extra time received from ordering online allows her to spend more time with her children. Like Instacart, Preci sion Capital offers the leverage nec essary to let borrowers focus on ele ments of a project outside the realm of origination and maintenance. “Deal flow is huge for us, and is a constant focus,” Crain noted. “We are constantly tweaking it to ensure we are offering the best service pos sible. One of the biggest moves we have made at Precision is consolidat ing our origination platforms.”
One example of this at Precision came when the construction lending component of the group grew quickly, and deal flow became constrained as a result. “Any manager will tell you that growth is never a value detrac tor on an institutional scale,” she noted. “But with that said, when our in-house inspector said that the as tronomical growth we experienced hurt his ability to handle new proj ects, we took a step back and really utilized the staff and technology we
Outside of the systems that have been put into place at Precision, Crain added that her team keeps their ears to the ground in terms of trends in private money. “Something I always say at the office is ‘more heads make better ideas.’ I don’t like the idea of top-down leadership, because when you work collaboratively, you can gather data points that you wouldn’t have thought of otherwise,” she observed. “This gathering of data,” Crain commented, “boils down to taking a proactive approach to issues and obstacles that may arise throughout the course of a deal.”
August 2022 Originate Report 49
For more information, please visit: https://precisioncapital.net/ job? No. But you must take stock and realize the steps you can take to change whatever situation you are in.” Crain shared that spending time with her family in nature – especially fishing and swimming – allows her to bring a clear head to the landscape of lending. Looking toward the future of Precision Capital, she mentioned that bolstered visibility of the field will only yield positive results for the firm. “I am not going to beat around the bush and say that we are the only show in town, but I think our focus on the borrower and the stellar team we have in place are only a few of the reasons why Precision is a leading private money source,” she suggested.
Located in Eugene, Oregon, the group offers borrowers from all walks of life private loans tailored for their needs. The property types financed by the group include residential, multi-family, construction rehab, and fix and flip. In addition to these services, Precision Capital is a staunch advocate for communitybased organizations. The group’s employees and leadership team donate hundreds of hours of their time to charitable causes, and Precision supports The Integrity Foundation. If you would like to learn more about Precision Capital, or how Precision can help you achieve your property and investment goals, visit precisioncapital.net. have at our disposal. Making the most of the tools you have is a surefire way to make sure that you are holding up your side of the bargain.”
When asked about some of these tools, especially those that have assisted Precision in navigating a rapidly-evolving real estate market, Crain replied that hiring a compliance officer – who is now the Chief Risk Officer – has helped the group stay on top of changing local, state, and federal regulations. “Our whole staff knows that if something does not seem right, or there seems to be new legislation in the works on a particular issue, to speak with her,” Crain responded. “We also attend conferences hosted by Geraci and AAPL because there is so much useful information there, especially coming off the heels of a hot housing market and the pandemic.” Broadly speaking, Crain told us there is no such thing as a ‘typical day-to-day’ for someone in private lending; but when thinking about her favorite aspect of the job, her answer was simple: solving puzzles. “I have always loved problemsolving,” she voiced. “Whether that means looking at a new loan product or a loan that is stuck in underwriting, there is never a dull moment. Solving puzzles is where I feel at home, and there have been many puzzles to solve with the crazy ups and downs we have seen in the market.”
Thinking about these shifts – and more broadly reflecting on her 20+ years of experience in the field – Crain cautions young lending professionals against the thought that lending is an ‘easy’ field. “This applies to your work and your life, but you have to be in the moment and cognizant of where you are,” she claimed. “I think about when my kids complain about school, or when a particular problem at the office is getting to me. Are you going to love 100% of school? No. Are you going to love 100% of your Precision Capital at Baseball Event
Many investors believe that diversification is good way to preserve wealth, but that specialization is the best way to build wealth. Lenders, regardless of strategy, are constantly walking the tight rope of trying to barbell risk and measured or methodical growth with ingenuity and production. With so much uncertainty and change anticipated in the housing market, the question is more important now than ever – which is a better strategy: Diversification or Specialization? Let us look at the pros and cons of Diversification versus Specialization (or Concentration) in the Business Purpose Loan Lender space. Different lenders have varying ideologies, strategies, and business models in how they define what they want their deal flow to look like. Given the current market environment and sharp increase of rates, which lenders are better poised for the potential tumultuous months ahead? Specifically, when it comes to diversification versus specialization, we will explore the following categories: Geography, Borrower Base, and Loan Product. Geography: Lenders specializing in certain markets have more expertise since this is their focus. These lenders can stay abreast of changing legislation and requirements for items such as permitting, inspections, etc., and can manage the risk associated with the resulting changing timelines or costs. Because they are usually in closer vicinity, they can see projects in real-time at a minimal cost and typically do not need a lot of overhead to manage their business or allocate resources to this purpose. These types of lenders also can build valuable relationships with local vendors and municipalities. However, focusing on only one market (or a limited number of markets) may oversaturate the lender’s exposure if there is a downturn or softening in home values on a local level, which will directly affect their deal flow and may extend timelines on their loans exiting. In a strong and competitive market, it may be difficult to win
50
sversdiversiFicationUsPeciaLization
Who is Better Poised/Positioned to Weather the Potential Storm Ahead? By Lauren Shea, Temple View Capital
CONTRIBUTED ARTICLE
Borrower Base: There are benefits to creating many deals from a limited number of borrowers. Lenders can focus on understanding each borrowers’ business and provide great customer service as they have fewer clients to manage. There is also a cost benefit for these lenders, as repeat clients with multiple loans will likely require less effort with each individual loan since the company is already familiar with the client. However, if a borrower hits a rough patch or is struggling with projects/investments, the lender may have significant exposure to potential losses if the client/borrower cannot exit the loan successfully or rehabilitate their situation. For lenders who loan money to multiple or many borrowers, there is less time with each borrower and fewer opportunities to understand their business. It is more difficult for these lenders to be bespoke or make specifical concessions/exceptions because they have an array of borrowers across many geographies.
August 2022 Originate Report 51 Lauren Shea Chief Credit Officer Temple View Capital https://www.templeviewcap.com/
Therefore, there is likely less flexibility for individual borrowers with lenders whose strategy is diversification across their borrower base because it is not sustainable to be bespoke and still be able to grow when there are many loans to many borrowers as opposed to only a few borrowers. But having this level of diversification potentially insulates the lender from a larger default exposure risk. If one borrower defaults, it is less likely to affect other loans in the lender’s portfolio. And it can also assist the lender with education in those specific markets and a network of resources to help manage any problem loans in their portfolio. Loan Products: Lenders can offer a limited number of products or product classes of many. If a lender chooses to focus on only a few products or one product class, they become an expert in that product and can quickly make changes and customize as the market moves. On the negative side, market volatility in the secondary market and investor appetite for specific product types can vary and shift. If secondary market pricing, availability of capital, and investor appetite is waning on a specific product or asset class, if a lender only specializes in one or few products, this could severely impair deal flow. Lenders
who offer multiple products or product classes can be somewhat protected from market volatility and balance the lender portfolio with other product types to help insulate the lender’s deal flow by altering its overall product composite. But too many product offerings can stretch resources thin and require personnel to be trained on multiple guidelines and products, which can be difficult to manage and is more susceptible to error. So, to revisit the initial questionDiversification versus Specialization: Who is better poised/positioned to weather the potential storm ahead? Will it be one or the other, or do both strategies have enough pros to outweigh their cons? Or is there a balance with diversification in some areas but specialization/ concentration in others? The real answer is that there is no magic bullet, and lenders must continue to balance specialization and diversification to stay relevant. In this market environment, it is evident that at a very minimum, the lender needs to be nimble to have controlled growth balanced against risk to ensure deal flow is both profitable and but risk adjusted. shares if there are other lenders competing in the same space for the same borrowers. Lenders who diversify their portfolios by lending nationwide or in many markets are unlikely to be experts everywhere and need to spend capital to stay up to date on microlevel changes in the regulations and timelines. As a result, the lender may be subject to unnecessary risk and forced to react to issues instead of proactively managing them. On the positive side, exposure to multiple markets can balance any potential risk of individual market downturns or market softening because these lenders lend more expansively across the country. This allows lenders to capitalize on growing markets and protects against isolated downturns.
What was the inspiration behind PeerStreet? Much of the inspiration for starting PeerStreet came from the 2008 financial crisis that brought the global economy to its knees. It showed clearly that the mortgage securitization system is overly complex with too many middlemen. We wanted to change that. So, when the crowdfunding laws changed with the JOBS Act to allow for more direct investment in loans, we saw an opportunity to reduce friction in a very complicated system. The result has been the democratization of this asset class in a way that was never possible. With PeerStreet, investors can create and fund an account and start investing in fractions of loans. This allows investors to achieve broad diversification across loans, real estate projects, geographies, lenders, etc. How has PeerStreet leveraged technology to enhance client experience? PeerStreet’s two-sided marketplace is completely enabled by technology: From creating and funding an
52 Building wealth and rebuild ing the American neighbor hood. You would be hardpressed to come up with a more meaningful organizational mission statement—but that is exactly what Brew Johnson, Founder and CEO of PeerStreet, and the rest of his team are striving to accomplish. Originate Report recently had the opportunity to chat with Johnson for a peek be hind the curtains of the industry’s first ever two-sided marketplace for investing in real estate debt.
GOLD SPONSOR
Making Real Estate Financing Better for Everyone By Mark Dewyea, Contributing Writer for Originate Report PeerStreet Team
The unique aspect of a platform like PeerStreet is that investor capital not only provides returns to our investors, but also improves properties, creates jobs, and revives local communities across the country.
The U.S. housing stock is in desperate need of an upcycling—the average home in the US is almost 40 years old. Historically, many communities were underserved by investment capital that would allow them to undertake necessary improvements. Most of the investments available on our digital investment platform are bridge loans to real estate entrepreneurs who buy undervalued properties to fix the property up and either sell it to a homeowner or rent it out to a tenant. The unique aspect of a platform like PeerStreet is that investor capital not only provides returns to our investors, but also improves properties, creates jobs, and revives local communities across the country. Contractors and vendors are hired, materials are purchased, real estate agents are engaged and renters and home buyers are presented with updated housing. As that plays out over multiple properties, entire communities can be significant ly updated and revitalized. To date, roughly $5 billion has been invested in loans through PeerStreet, which has resulted in thousands of neigh borhoods throughout the country improving and more than a billion dollars in estimated value creation for loan investors, borrowers, and communities where the properties are located.
August 2022 Originate Report 53 PeerStreet: Continues on pg. 54 account, to how investors access opportunities to invest in, to the software we have developed for borrowers and lenders, technology is in everything that we do and the cornerstone of our business. What types of loans do you source from lenders? Is there a vetting protocol? What factors do you focus on when selecting the loans? We see billions of dollars of loans from hundreds of lenders across the country. We source loans from private, non-bank lenders and brokers. The loans are typically short-term bridge loans (as well as 30-year rental loans) on residential or multifamily properties. Lenders and brokers must be approved to submit loans into the marketplace. Submitted loans are run through a vetting and diligence process by PeerStreet (and/ or third parties) before those that satisfactorily meet our standards are passed on to our investors. How does PeerStreet aim to rejuvenate local communities?
• PeerStreet Pocket is a shortterm cash-alternative investment vehicle that yields 7x more than an average savings account.
• Early Access loan investment opportunities provide investors with yields that are generally reflective of market conditions in real time. This gives our investors a more responsive rate when market rates change quickly.
For More Information: https://www.peerstreet.com/home
54 PeerStreet: Continued from pg. 53
• Automated Investing gives our investors the advantage of not missing out on loans that fit their selected criteria. This tool provides the benefit of being the first into an investment without even logging on.
• Flex Loans recently launched with the goal of giving origina tors and borrowers more loan opportunities with wider credit terms, better rates, and lower maximum leverage. Additionally, we are preparing to launch our Index Portfolios built from a cross-section of loans from our platform that will provide inves tors with instant diversification with some of the best interest rates in the market. Portfolios will include un derlying properties of single-family or multi-family residences with loan terms of 24 months or less. We also plan to expand our Pocket product, giving investors more options that keep their uninvested dollars work ing for them while they wait for the right opportunity.
• PeerSuite is a white-labeled loan application and loan scenario tool customized to the originator’s branding. PeerSuite’s features allow originators to collect borrower data and streamline their process completely digitally. We are very bullish on this approach, and initial tests are showing this effort will pay off for everyone involved.
What types of investors do you typically work with? What types of returns can they expect? We work with both individual and institutional investors. I think the asset class appeals to a wide variety of investors and the fact that we have taken an asset class that was historically difficult to access and manage and made it a fully digital experience is appealing to many types of investors. That attractiveness seems to be increasing in an environment where many stocks are down 50% or more, trillions have been lost in the crypto space, and even “safe” bond funds are down 6% and more. What role does the PeerStreet team play in managing/servicing the loans? For investors on the digital platform, PeerStreet is the master servicer, and we handle collections, account ing, distributions, reporting, taxes, etc. PeerStreet acts on behalf of in vestors to achieve fast and favorable outcomes. What makes PeerStreet unique? What qualities set it apart from the competition? As the only true digital platform and marketplace for private real estate loans, PeerStreet provides benefits to all parties. Lenders get a techdriven platform and dedicated team of account managers, underwriters, closers, servicers, and marketing to help them exponentially grow their business without growing their headcount, as well as access to capital to fund their loans. Borrowers indirectly can access more capital through these Lenders. Investors can digitally build the most diversified portfolio of loans from all across the country with unprecedented access to thousands of lenders and borrowers while only having to deal with a single counterparty: PeerStreet in a fully digital format. What does PeerStreet have planned for the future? PeerStreet plans to continue providing valuable technology services for investors, lenders, and borrowers. We are working to build a platform where a borrower for any real estate loan can get access to capital within days. The process of funding that loan is as easy as the consumer-facing applications you use daily to book flights and hotels or purchase goods. We also recently launched several products that we expect to provide tremendous value to our clients:
56
Lending Worth its Metal
When Todd Pigott, the President of ZINC Fin ancial, was working in the facilities management business over 20 years ago, a utility vehicle accident almost took his life and the lives of his three children. At that moment, Pigott decided that life was too short to work in a field he had no passion for, and ZINC Financial was born. The investment rehab lender, which is headquartered in Fresno, California, specializes in private money rehab loans and helps investors leverage capital to acquire and rehab properties for investment purposes.
Todd Pigott President, ZINC Financial, Inc.
Looking back on that fateful day, Pigott, who sat down with Originate Report to discuss the ins and outs of deal flow and what sets ZINC Financial apart from the competition, said he challenges those around him to use otherwise tragic events as a source of strength and growth. “We all ended up in the trauma unit after the accident, and I almost lost my life and my leg. I was in a wheelchair for months and had six surgeries to recover,” Pigott described. “When you are in a wheelchair and going through surgeries and laying on hospital beds, you reevaluate things very quickly.” This reevaluation, he stated, laid the groundwork for the formation of ZINC Financial. Transitioning from facilities management to real estate, he added, was a welcome challenge. “Like so many budding companies, I learned so much from the early days of ZINC,” Pigott noted. “One of the
By Charles Peckman, Contributing Writer for Originate Report
FEATURE ARTICLE
For more information, please visit: https://zincfinancial.com/
Navigating difficult periods aside, Pigott said ZINC Financial works tire lessly to ensure the group stands out from the crowded lending space. “I think what separates us from the com petition is that we have control of all our decisions right here,” he expressed. “We are a cradle-to-grave lender, and very few lenders are. We do our own servicing, underwriting, and processing. What we try to impress upon potentialborrowers is that we are the real deal.” Standing out as a true performer in the space, Pigott admitted, can be difficult because of the lore surrounding ‘fix and flips’. ZINC Financial, on the other hand, has a proven track record in having borrowers’ backs and following through on countless transactions, he told us. To date, ZINC has fixed and flipped over $100 million in real estate and has conducted far more than 1 billion in lending on fix and flip projects. “I think the key to success, and I try and tell my kids this, is that you have to set your alarm, get up early, exercise, and get at it – you are going to have a lot of setbacks and a lot of lessons,” Pigott insisted. “At the end of the day, it is going to take a lot of work and a lot of energy, and that mantra is a large factor in how ZINC has been successful.”
The answer to this is that you truly must add value. You cannot rely on market lift, which was the case previously. I remember when you could buy a house, put in carpet, and hold it for six months at 12 percent appreciation year over year. We do not have that today and need to adjust our collective toolkit accordingly,” he observed. This toolkit adjustment, from his perspective, has been in full swing over the past few years – especially when considering the relationship between changes in the housing market and the COVID-19 pandemic. “The real estate market has been doing very well, and we are happy that our space is doing well. By the same token, we have had complexities such as the disruption of supply chains and working with governmental regulations. Throughout the pandemic, we have been able to lend more and expand and are exceptionally active right now.”
August 2022 Originate Report 57 main lessons I learned is that you can fix bad properties, but you cannot fix bad people. When we delved into the poor credit, subprime, or second position loans with less-than-stellar people, those transactions were exceptionally unprofitable for us. Today, we center our model around customer service and being there for our borrowers. But most importantly, choosing to work with good people.”
Securing capital – especially when thinking about rehabbing a distressed asset – is part of the ZINC Financial DNA. But when the housing market begins to cool off – or when periods of inflation venture outside the realm of transitory – Pigott commented that framing deals through the lens of viability and profitability remains critical. “The question I always ask myself is this: ‘how do I know that my project is really going to be viable?’
When thinking about ZINC’s end of the equation – and more specifically what causes borrowers to come back time and time again – Pigott emphasizes that the deal flow formula remains paramount. What this formula centers around, he added, is one simple question: ‘what does it take to make sure my deal is going to flow through with the path of least resistance?’ In his mind, the recipe ZINC employs to maintain healthy deal flow comes down to four distinct elements: working with your own cash, ensuring the creditworthiness of borrowers, focusing on LTP, and striving for a property with a strong value-add. “We have our own cash on hand, and we fund our own deals. We push our own red button for the wires and send it all from right here at ZINC,” he mentioned. “The number one rule for deal flow out there today, in my opinion, is finding a real lender with their own capital; 85 percent of them are not, and that 85 percent is relying on capital markets over their own sources of capital.”
58 CONTRIBUTED ARTICLE It is no secret that the private lending industry can be highly complicated and technical. There are countless rules and regulations to follow, and there is a great deal of risk inherent in the business. For this reason alone, the industry relies on strong processes that ensure deals remain on track and within compliance standards. Given the level of detail and technical knowledge that must be applied to each deal, how can
By Tricia Mitchell, Archwest Capital
Tricia Mitchell Chief Operating Officer, Archwest Capital to Deal Flow
Build Programmatic
Leveraging Talent
lenders ensure these needs are being met at volume? At Archwest, we think the answer is simple: tuning in to the people involved. When a lender evaluates deal flow less as a transaction to track on paper, and instead looks more deeply at the people involved, this can help to build much stronger processes that are scalable and repeatable. Here are four prime areas on which to focus: Empowering your team As with any industry, the key to managing a successful team is to leverage the right talent in the right role. At Archwest, we believe firmly in two elements: establishing management teams who have deep expertise in the core competencies of the departments they oversee, and cross-departmental training. With this blend, organizations ensure that each department team has an expert at the helm while also being able to build
Continues on pg. 60
August 2022 Originate Report 59 processes and checklists that connect cohesively across departments. For example, Archwest’s closing team is led by two women with extensive escrow and title expertise. Although it is not common in the industry to have a closing team learn the nuts and bolts of title work, we pride ourselves in teaching all our closing associates the importance of title insurance and required endorsements. Due to this, our team does not outsource title review to a third party, and we conduct all the analysis needed in-house. This not only increases efficiency but allows us to control the narrative and field client questions without having to reach out to others for answers. To truly empower a team, it is also critical to never lose touch with dayto-day point of contacts, as they will have the closest perspective to the work’s execution. Many leaders may be astounded by what they learn when asking questions such as “what is making your job most difficult right now?” or “what elements of your role do you most enjoy?” The wealth of insights and ideas that come from these conversations are invaluable. No single leader is meant to have all the answers. By empowering the team around you and showing appreciation for each team member’s voice, associates will want to speak up and contribute. Nothing is more powerful than when all team members row in the same direction, for the betterment of the company. Embracing feedback and optimization When a leader truly understands and respects the humans behind their business, embracing their feedback becomes much more natural. And this feedback is critical to fine-tuning and streamlining processes to ensure deal flow can continue to scale. For example, after receiving valuable feedback from trusted broker sources, our team at Archwest pivoted to performing only soft credit checks as part of our diligence requirements. In this business, borrowers run the risk of lowering their credit scores because of frequent hard inquiries each time they apply for loans. We want to help borrowers receive the funding needed for a successful project, and soft credit pulls allow us to do so just as efficiently. Our team is particularly proud of how quickly we have turned feedback into enhanced processes. At Archwest, we combed through the application process to further enhance the types of information we collect from our clients. Based on feedback from borrowers and brokers alike, our team reduced our loan application from eight pages to three, excluding the signature page. By eliminating information, we can collect without input from the client, we were able to streamline the process without enhancing any additional risk.
Establishing escrowsbrokers,relationshipslong-termwithborrowers,titlecompaniesand Embracing the mentality of serving clients as a financial partner, and not just a lender, can make all the difference in establishing a Archwest Capital:
Tricia Mitchell Chief Operating Officer Archwest Capital https://archwestcapital.com/
When a lender evaluates deal flow less as a transaction to track on paper, and instead looks more deeply at the people involved, this can help to build much stronger processes that are scalable and repeatable.
Building trust with brokers Brokers arguably understand people and relationships better than any other group. The broker community pays close attention to all the industry players and understands the nuances and reputations of each team. For this reason, it is essential to build strong processes and teams that brokers learn they can rely on to execute deals. If a hurdle arises during escrow or with a seller, brokers will look for financial partners who have a process for addressing these challenges and will roll up their sleeves to resolve the issue. Deal closings are the lifeblood of a broker’s business, so at the end of the day, they will turn to the lenders they know they can trust to execute. At Archwest, direct access to capital and having sole authority to make credit decision without layers of approvals are valuable attributes that brokers appreciate in a Optimizationlender. is a consistent process and should never stop. For these processes to truly be scalable and repeatable, test them continually. This is particularly important with technology components. When launching a borrower portal, for example, our team beta tested the portal for weeks to identify every potential pitfall and what the impacts may be to each department. After launching the portal, we test the functionality regularly and do not rely solely on technology to alert us to kinks in the process. I am always astounded by the overwhelming perception of the lending industry as a business built on spreadsheets and bottom lines. I would argue that people are the essence of the industry. People build and manage the processes that enable the business to run and deals to flow. We are, and will always be, in a people-focused business.
60 Archwest Capital: Continued from pg. 59 relationship with borrowers for the long term. As a key partner, one of your chief roles is to ensure that your borrowers have a smooth and positive experience throughout the project’s lifecycle. Giving guidance above and beyond the scope of loan closing and servic ing – such as helping clients under stand the budget, market fundamen tals, initial due diligence, or escrow and title requirements at inception – demonstrates a partner’s commit ment. A financial partner wants a borrower's project to be successful, but not solely for the bottom line on a single deal. Focusing on the longterm relationship is what drives opportunities for future projects. To ensure a smooth experience, lenders may consider establishing a distinct, branded process that borrowers can learn to count on through the loan closing. Clear communication and consistency are crucial. The process should be no more than a few steps and help borrowers understand what to expect from the deal’s flow.
FROM IT’SANYWHERE!BHBTVCOUCH,FAMILYTVBOARDROOMTHETOYOURROOMWATCHALWAYSFREE! ACCESSUNLIMITED Unlimited access to all BHBTV content on top of the industry channel content, industry podcasts and more! Watch from anywhere at any time! Learn together in your boardroom on the boardroom TV or watch and learn with a glass of wine on your outdoor TV. That’s because we’re available FREE on all SmartTV’s and or any device including: Are you ready to unleash your own success? When you download BHBTV FREE, you’ll learn from the industry’s top mortgage and real estate producers. They will share how they became so successful and the exact steps they took to get there! ELEVATE SUCCESS!YOUR ON!WATCH THE INDUSTRY’S ONLY CONTENT DELIVERY NETWORK 100% FOCUSED ON YOUR SUCCESS. DOWNLOAD BHBTV FREE, NOW! SCAN TO DOWNLOAD FREE NOW! BROKERS. HELPING. BROKERS NOW PLAYING: Lender Lounge with Kevin Kim Presented by Geraci LLP August 2022 Originate Report 61
How Opening the Economy
By Edward Brown, Pacific Private Money
62 W hen the COVID-19 pan demic first hit the United States in March 2020, it was anybody’s guess as to how the private lending market would be impacted. At first glance, one would presume that loan de mand would have been negatively affected due to the expectation that borrowers would “hunker down” and not ask for or spend money as the nation and the world experi enced a shutdown of this magnitude. In the early stages of this effectual shutdown of most of the economy, this was the case. Borrowers were reluctant to take on debt, as the future was uncertain regarding how they expected to pay back loans. Even though most businesses saw a significant decrease in revenue as time went on, the lockdown and shel ter in place had another effect; many people felt uncomfortable where they lived and were frustrated to be at home 24/7. This was difficult for people as they tried to balance work with home life, especially those with younger children who were unable to go to school. Since many businesses were closed, people were able to save money, because they had no place to spend it. Working from home was quick ly becoming the new norm. People started to ponder the future regard ing the work/home life balance, and many chose to increase their living space. This, in combination with no commutes for most workers, caused a price increase of homes in the sub urbs where one could buy a larger house than in metropolitan cities. The frenzy that ensued for house purchases was a boon for private lending. Not only were banks a bit gun shy due to the pandemic, but buyers were facing competition and needed a competitive edge – quick closing offers. Because banks slowed down on lending and the ability to provide capital very quickly, many private lenders had their best deal flow, by volume, in decades. The question for private lenders, is what happens after the economy eventually loosens up restrictions for most businesses, so they can get back to a somewhat normal cy cle? Some believe that working from home will be the new norm for many workers. Companies with remote workers have proven that they can be productive over this past year. These same companies looking to cut costs
CONTRIBUTED ARTICLE
Back Up Should Affec t PRIVATE LENDING
Mark Hanf, president of Pacific Pri vate Money, has seen these buyers come to him in droves for capital and reports that his company had its best quarter in quarter 4 of 2020. One of the main advantages of private cap ital markets is that they do not have to rely on asking for new apprais als in every situation. Each case is different, and many times, a recent appraisal that the borrower pro vides to the lender or a broker price opinion might suffice. Banks need to follow FIREA guidelines where the appraisal process is much longer, and this lends itself to a lengthy pro cess to which the borrower may not have the luxury of waiting. How long will the demand for pri vate capital last? If banks continue to drag out the lending process, de mand for housing stays consistent, and borrowers’ desire to purchase before interest rates and housing prices increase beyond where they feel comfortable, there should be a steady flow of requests for the foreseeable future.
Edward Brown Investor Relations Pacific Private Money https://www.pacificprivatemoney.com/
August 2022 Originate Report 63 will point to cost savings on their in come statement by lowering a large part of their expenses – rent. Since employees do not need to come into the office and can use Zoom when working from home, rent expense can be significantly eliminated. For example, SF Gate reported that Sales force cut back 325,000 square feet of space it was planning on occupying in San Francisco after adopting a permanent remote work policy. Com panies such as Drobox, Twitter, and Facebook have also adopted similar policies. Rent in the surrounding areas has decreased as much as 20%, but prices for homes have not seen such a decrease, and homes with more square footage command a premium. There is the possibility that once a vaccine is widespread and restrictions have been lifted, many companies will start to re quire employees report back to the office. Some companies are already requiring that their staff go back to working in the office, as they believe productivity will increase compared to at-home workers. This may force a shift of people moving back to the city from the suburbs. Interest rates are still relatively low, but they are starting to increase. Many home buyers believe they should find something soon before the rates for mortgages climb. The demand for capital is still strong and it does not appear that it will taper off anytime soon. Banks still have strict criteria regarding lend ing standards, and recent changes in the Dodd Frank rules did not di minish these standards. As inter est rates have risen, less borrowers have been able to qualify for bank financing due to debt ratios imposed by conventional lenders. In addi tion, borrowers who requested de ferments from their lender may not have had their credit scores lowered due to these requests, but a memo recorded in their credit report has effectively prohibited conventional financing for them. Another reason many believe de mands for housing will continue is due to a housing shortage. Too many restrictions by city or county officials hamper housing starts, and costs of both material and labor have dramatically increased. This puts an undue burden on builders, as their profit margin gets squeezed. The law of supply and demand and relatively stable low interest rates should keep housing prices strong. During the Great Recession, many homeown ers lost their houses to foreclosure. Millennials remember how their par ents lost their home, and this led to people renting instead of purchasing a home. This new generation is now starting families of their own and are buying homes instead of rent ing, which is expected to fuel higher housing prices. Many housing sectors are still see ing multiple offers on houses that are sold in less than a week, though this has started to slow down. This phenomenon puts the would-be buy ers in a predicament as to how they can put in an offer that will be accepted to a seller. This is where private capital is an important asset to potential buyers, as they can use private capital to make their offer much more attractive to the seller and close the transaction quickly without contingencies.
Eric Abramovich Co-Founder and Chief Credit Officer, Roc Capital Eric Abramovich is the Co-Founder and Chief Credit Officer of Roc Capital and has pioneered its Residential Private Lender Program which has contributed to originating over $7 billion in loans. Previously, Abramovich was a director at Deutsche Bank where he managed a quantitative equity long/short strategy trading Japanese equities. Additionally, he co-founded an investment vehicle which invested in distressed residential real estate assets post the financial crisis. Abramovich holds a B.A. in Finance and Actuarial Science from the Stern School of Business at New York University. https://roccapital.com/ Mariska Crain Director of Lending, Precision Capital Mariska Crain has been in mortgage lending since 1997 and has worked in every type of mortgage, from A-Paper to Subprime and Retail to Correspondent Lending. In 2013, after taking a 5-year break to stay home with her children, she returned to work with the owner of what used to be the conventional lender Precision Funding, only to find they had become the private money company, Precision Capital. Always up for a challenge, Crain signed on as a servicing specialist, one of 3 employees, and has enjoyed being part of the exponential growth that has given Precision Capital a pipeline of over $125M in loans, 3 investment funds, 15 employees and over $100M in assets under management. Now the Director of Lending, Crain enjoys that private money means constant change, creativity, puzzle solving, and a lending landscape that is anything but ordinary. https://precisioncapital.net/ Brew FounderJohnsonandCEO, PeerStreet Brew Johnson is the co-founder and CEO of PeerStreet, a platform for investing in real estate backed loans. Johnson’s experience with technology platforms, real estate, and law culminated in the unique PeerStreet concept. Prior to PeerStreet, he worked as General Counsel at VirtualTourist where he oversaw the company’s $85 million sale to Expedia/TripAdvisor. Before that, he was a real estate attorney at Allen Matkins Leck Gamble & Mallory, and a technology attorney at Brobeck, Phleger & Harrison. At Allen Matkins, Johnson advised some of the largest real estate development and investment firms in the country on a wide variety of complex real estate transactions. He continues to advise startups and is an active real estate developer, investor, and private lender.
64
https://www.peerstreet.com/ THANK YOU, GOLD SPONSOR PRESENTERS 2022 CONFERENCE CAPTIVATE
https://precisioncapital.net/ Greg ManagingMeolaDirector, Head of Business Development and Strategy, Acra Lending
Alex ManagingOffuttDirector of the Wholesale and Correspondent Divisions, Constructive Capital
Kevin President,SimrinCEO, and Founder, Precision Capital Kevin Simrin is a true Oregonian, proudly born and raised in Lane County, Oregon, although he and his wife now split their time between Oregon and Palm Springs. Previously the owner of seven RE/MAX Real Estate brokerages in the Northwest and a conventional lending company, he is now the President and CEO of Precision Capital, an Oregon-based Private money lender he founded over a decade ago. Precision Capital originates, funds, and services its entire portfolio in-house, a portfolio that currently sits at over $125,000,000 in active loans. In addition to Precision Capital, Simrin is the General partner for three Funds, managing assets of over one hundred million dollars. Simrin has a passion for supporting those less fortunate, which drove he and his wife, Wendy, to launch the non-profit Integrity Foundation in 2017. This allowed him to turn some of Precision Capital’s profit (along with the profits of his other entities) to good, by pouring them into areas of need in his local community.
https://acralending.com/
Greg Meola's current role is Business Development and Strategy for Acra Lending. He has an extensive knowledge in mortgage and mortgage-related services, and has a depth of knowledge in vendor management processes, regulatory compliance, valuation services, consumer/business purpose mortgage lending, and the foreclosure legal process. As a consultant, Meola has worked in large Wall Street and fortune 500 companies as well as the small entrepreneurial sector of the mortgage business and has worked in many different project roles including Loss Mitigation for a Fortune 500 Company.
Jeffrey Lemieux Managing Director, Correspondent Lending, Acra Lending Jeffrey Lemieux is the Managing Director, Correspondent Lending. Before joining Acra, Lemieux was the CFO and COO of Isles Ranch Partners, a real estate investment firm focused on residential acquisition, development, and construction investments throughout the U.S. Prior to joining Isles Ranch, he was a Senior Vice President at Bayview Asset Management, an investment firm focused on investments in mortgage credit, including correspondent and wholesale mortgage originations. Lemieux has worked as a Senior Vice President with Ally Bank (formerly GMAC), responsible for correspondent lending and fee-based servicing. Preceding his tenure at GMAC, Lemieux was a Senior Vice President with Cerberus Capital, responsible for overseeing investments in lending institutions, prospective acquisition diligence, and mortgage-backed trading.
https://www.constructiveloans.com/ Mark Founder,McKellerTheBedrock Fund Mark McKeller is an experienced real estate investor, who has bought and sold or rented more than 800 houses. This history has introduced him to a large group of experienced real estate investors in the country who need the type of unique loans offered by the Bedrock Mortgage Fund (The Bedrock Fund). The Bedrock Fund borrowers include some of the most experienced and successful HomeVestors of America (We Buy Ugly Houses) Franchisees. McKeller’s connections within that network and otherwise are catalysts for quality loan volume and exceptional underwriting, which helps make investments the safe, reliable, and predictable. The Bedrock Fund pays a fixed rate of return, with payments starting as soon as an investment is made. https://www.thebedrockfund.com/
August 2022 Originate Report 65 Ray FounderSturmand CEO, AlphaFlow Ray Sturm is the Founder & CEO of AlphaFlow, a capital partner to private real estate lenders. AlphaFlow works with private lenders around the country to expand their balance sheets and helps them grow their businesses through new loan products and industry-leading technology. Prior to launching AlphaFlow, he founded RealtyShares, one of the industry's top platforms for real estate investing. His early career in finance included investment banking at Bear Stearns and Lazard Frères and private equity at CCMP Capital. Sturm has a BBA in Finance from the University of Notre Dame and a JD/MBA from the University of Chicago. https://www.alphaflow.com/
https://acralending.com/
Alex Offutt currently serves as Managing Director of the Wholesale and Correspondent Divisions of Constructive Loans. Prior to Constructive, Offutt served as a Vice President at Goldman Sachs, where he was responsible for loss mitigation servicing oversight for over $20 billion in non-performing residential mortgages. Before Goldman Sachs, Offutt was Vice President for Portfolio Strategy at PennyMac Loan Services, where he oversaw their entire $3 billion of non-performing and re-performing whole loans. Offutt also has served as Portfolio Manager for a San Francisco-based non-performing residential loan (NPL) fund, and was a co-founder of Fay Financial, LLC.
66 2022 CONFERENCE CAPTIVATE
Keith Lind CEO, Acra Lending Keith Lind is the Executive Chairman & President of Acra Lending with 19 Years of Mortgage-Backed Securities and Asset-Backed Securities trading and structuring experience. He was a Managing Director at HPS Investment Partners before joining Acra Lending. Lind was a Trader at Brevan Howard and prior to joining Brevan Howard, Lind was a Managing Director and Head of the US NonAgency Mortgage-Backed Securities Trading Desk at RBS. He was a Managing Director at Bear Stearns, where he traded the NonAgency Mortgage-Backed Credit book. Mr. Lind holds a BA in Finance from Purdue University. https://acralending.com/
Jeff Co-FounderFechter and CEO , HouseMax Funding, LLC HouseMax Funding, LLC is a private lender based in Austin, Texas, that provides financing for real estate investors across the United States. Fechter is also the co-founder of a real estate firm that specializes in sourcing investment opportunities for Central Texas investors. This company has provided a significant referral opportunity for these investors to utilize HouseMax Funding capital to procure their investment properties. Prior to the founding of HouseMax Funding, Fechter was co-founder of Aslan Residential (Texas) which was a private equity fund that principally bought and sold over 300 homes in the Central Texas market. Before co-founding the Texas arm of Aslan Residential, Fechter was VP of Sales for Aslan Residential, where he built a real estate brokerage that sold over 2,000 repositioned residential assets. https://housemaxfunding.com/ Jan Brzeski Managing Director and Chief Investment Officer, Arixa Capital Jan Brzeski founded Arixa Capital in 2006 and serves as Managing Director and Chief Investment Officer. In this capacity, he has ultimate responsibility for the Firm’s investment strategy, risk management, and operations. Brzeski has extensive experience with every aspect of real estate investment. He has participated in more than 1,600 real estate transactions, investing over $2 billion on behalf of Arixa’s investors and partners. Since he founded Arixa Capital, it has become one of the West Coast’s premier non-bank real estate lenders, providing small balance loan solutions to lower middle market residential and commercial investors and developers. https://www.arixacapital.com/
Yariv Co-FounderOmer and CEO, Reigo Yariv Omer is the Co-Founder and CEO of Reigo. He brings 22 years of leadership of software groups and companies. Before joining Reigo, Omer serves as the GM and founder of Technicolor Israel, in addition he held positions of Head of R&D at Jungo, managing SW deployed in more than 70 million homes. Also, large scale R&D and product executive in Cisco and Radcom. https://reigo-inv.com/ Ketan ManagingParekhDirector and Head of Business Development and Capital Markets, Toorak Capital Partners
Ketan Parekh is a Managing Director and Head of Business Development & Capital Markets at Toorak Capital Partners. In this capacity, Parekh manages lender relationships, loan trading, and securitization activities. In addition, Ketan is a member of the Toorak management team. https://www.toorakcapital.com/ Tess Siwa Senior Vice President of Operations, Constructive Capital As Head of Operations for our rapidly growing private lending organization, Siwa has tremendous breadth of responsibilities for both originations and investor portfolio management. She brings over 30 years of residential mortgage and business purpose lending experience and has served in various leadership capacities in sales, processing, underwriting, closing, vendor management, servicing, and asset management. Prior to joining Constructive Capital, Siwa was in leadership at Jordan Capital/Finance of America Capital for five years, PHH Mortgage for three years, and Morgan Stanley Private Bank for 18 years working with ultra-high net worth clients. Siwa has been a strong leader with large teams, leading operations at teams that have numbered more than 100.
THANK YOU TO OUR EVENT SPEAKERS
https://www.constructiveloans.com/
August 2022 Originate Report 67
Steve Skolnik CEO, ClearEdge Lending Since 2018, Steve Skolnik has been CEO of ClearEdge Lending LLC, a Wholesale, Non-Delegated and Retail origination company.
Jason StructuredZhangFinance Director, Churchill Real Estate
•
Rudy Zabran Chief Revenue Officer, Consolidated Analytics
For More Information About Our Conferences & Events: Ruby
Clint Thomas manages the non-Agency whole loan acquisition business at Bayview Loans. Prior to his current role, he spent time in Capital Markets & Pricing as well as other Business Development roles within the firm. Bayview Loans is part of the Bayview Asset Management, LLC family of companies, which managed about $14.6B of AUM as of March 2022. https://bayview.com/ Jeffrey Tesch CEO, RCN Capital Jeffrey Tesch, Chief Executive Officer, is responsible for overseeing the operations of RCN Capital, including sales growth initiatives, underwriting review with compliance oversight, and leadership of senior level strategic planning. Joining the company in 2010 as Managing Director, he led efforts to develop a national brand in private lending with the best practices and transparent products for a diverse customer base. Since RCN’s inception, Tesch has overseen over $3 billion in originations. His previous real estate experience was as an investor in both commercial and residential properties, ranging from single family homes to commercial retail centers. Tesch currently serves as a member of the American Association of Private Lenders’ (AAPL) Ethics Advisory Committee and as an Advisory Council member for the National Private Lenders Association. https://rcncapital.com/
• https://geracicon.com/
Previously, from 2012-2018, Skolnik served as Managing Director for PennyMac’s CRE channel and CEO of ReadyCap’s Commercial Small Balance CRE originations platform. He was hired by Lehman Brothers in 2006 as EVP of Aurora Bank’s Residential and Small Balance Commercial origination platforms and served as EVP of Production for First Franklin from 1995-2006. Skolnik’s first role in the residential lending business dates back to 1989 with Countrywide in the Correspondent Division. https://clearedgelending.com/
Rudy Zabran is the Chief Revenue Officer at Consolidated Analytics, a leading provider of end-to-end mortgage services including residential valuation, fulfillment, due diligence, component services, consulting, and advisory. In this role, Zabran oversees the strategy and execution of all business development, marketing, sales, and client relations operations. He is responsible for building and strengthening customer and business partnerships and delivering client-centric solutions that improve quality, efficiency, and performance from the asset through the enterprise. Zabran also supports the development of the company’s RMBS due diligence operations and capital markets solutions. He has more than 18 years of experience in the mortgage and capital markets industry including deep experience in RMBS underwriting, credit and collateral quality, regulatory compliance, and due diligence operations.
Jason Zhang leads the structured lending business at Churchill Real Estate. In this role, he oversees a $5 billion lending book against residential transitional real estate debt and is responsible for transaction structuring and execution, portfolio management, and investor reporting. Prior to Churchill, Zhang led the mortgage whole loan analytics team at Wells Fargo Securities, where he was responsible for collateral valuation and lending strategies for a $5 billion book that financed various specialized mortgage investments for institutional investors. Zhang started his career as an investment banker at Bank of America Merrill Lynch’s asset-backed securities group, where he originated a variety of ABS transactions. https://www.churchill-realestate.com/ Kevin Co-FounderWernerand CEO, Renovo Financial Kevin Werner is the Co-Founder & CEO of Renovo Financial, a private lender and partner to residential real estate investors. Renovo employs a one-stop shop model with a full suite of loan programs, including single family and multi-family rehab, new construction, and 30-year fixed rental loans, as well as in-house underwriting and servicing. Werner has over 25 years of executive experience in the private lending industry and an extensive residential real estate investing track record. After recognizing a gap in the market for well-qualified residential real estate investors to access project financing, Werner co-founded Renovo Financial with Daniel Rosen and Granite Creek Partners in 2011. Together they have a commitment to creating the best products and pricing while still providing the attention and service of a local lender. https://renovofinancial.com/ Keys • (949) 379-2600 r.keys@geracillp.com
https://renovofinancial.com/ Clint Thomas Vice President of Correspondent Lending, Bayview Loans
68 CORPORATE & SECURITIES • Securities Offerings and Compliance • Entity Formation • Corporate (Governance, M&A, Capital Marketing) • Mortgage Licensing LITIGATION & BANKRUPTCY • Judicial Foreclosure • General Business Litigation (Partnership, Investor, and Vendor Disputes) • Creditor Representation in Bankruptcy • Other Mortgage Loan Litigation • Replevin BANKING & FINANCE • Foreclosure/Loss Mitigation • Nationwide Loan Documents • Nationwide Lending Compliance LIGHTNING DOCS • Fully Automated, Customizable Loan Documents • Documents Constantly Updated and Approved by Local Attorneys • Available in all 50 States • No Re-Draw Fees, Upfront Costs, or Contract Period OTHER SERVICES • Conference Line • Originate Report Magazine • Lender Lounge Podcast OUR SERVICES CONNECT WITH US WE OFPEACEPROVIDEMIND Geraci LLP is a full-service law firm and conference line specializing in non-conventionalrepresentinglenders. (949) 379-2600 90 Discovery Irvine, CA https://geracilawfirm.com/originate-report/https://geracicon.com/https://lightningdocs.com/https://geracilawfirm.com/92618
