Third Quarter Update with 7E Investments
On the investor relations front, the company has over 250 investors, more than doubling our investor count since the end of the first quarterly update. 7e has consistently delivered distributions on time and as expected at 8% annually, paid monthly. Our raise efforts have allowed our asset management team to double the portfolio to approximately 20M in AUM.
Market Update & Acquisitions
This past quarter we have analyzed over 1,000 assets valued at over $200M and placed bids on over $10M of assets. So, as expected, we are continuing to see an increase in distressed debt on the market which gives us the opportunity to work with more struggling homeowners. Based on this activity, we have an award rate of approximately 20% of the assets we bid on. This activity has allowed us to grow the fund and while writing this newsletter, we were awarded another 12 assets. We believe we finished the year off strong and are expecting Q1 of 2023 to continue to see significant growth in acquisitions.
Case Study #1 – Sometimes it takes a nudge to get the borrower to pick up the phone
Calumet City, IL
This recently acquired loan the borrower was 28 payments behind and non-responsive. Because the borrower was nonresponsive to phone calls and letters from our servicer, we engaged an attorney to send a demand for payment letter. As we typically see, when a borrower receives a letter “From The Law Offices..”, it does not automatically get ripped up and thrown in recycling. When a demand letter is sent, per the terms of the mortgage, the lender can accelerate all the payments and make the loan due. In this instance, the amount due was $70,000.
This got the borrower to react and call the attorney. The borrower acknowledged they wanted to stay in the home and was able to make a $15,000 payment. Now that we got the borrower to communicate, we were able to work out a forbearance plan whereby the borrower would be allowed to make the $15,000 payment and monthly payments of $1,000 until the loan was caught up.
This was a win-win for both sides as we keep a borrower in their home and were able to collect a significant sum of monies.
Case Study #2
In this case study, the borrower was eight months behind on payments with their payment less than $500. The borrower had fell on hard times and called our servicing company to learn what programs we had to get back on track. The borrower could not afford the full amount owed to bring the loan current and wanted to inquire if we could set up a payment plan. Unlike large institutional banks which could take months to get back to the borrower on an answer, we are able to respond in minutes to our servicer. The borrower offered to pay $1,500 down payment and $1,000 the following week and $1,000/month until they were caught up. We accepted this offer within minutes and the servicer called the borrower back to notify them of this and collect the payment over the phone.
Another win-win situation for both the borrower and for our investors.
Case Study #3
West Chester, PA
This case study shows how 7E can be creative and work with the borrowers and maximize the value of the asset. This loan the borrower had reinstated the loan to bring the loan current but had over $4,000 in charges added to the loan. The borrower did not have the funds to pay the charges and we wanted to work with the borrower to reduce the fees added to these charges as well as maximize the value of the asset.
In order to maximize the asset value, investors purchasing loans where the borrower is current on payments will still reduce their pricing if the loan has additional charges on the loan, as it is not viewed as a true performing loan. So how do we resolve this?
We contacted the borrower to work out a loan modification whereby we would adjust the loan balance to include the late charges. Why would the borrower want to modify the loan? The charges on the loan were collecting interest HIGHER than the unpaid balance of the loan, so by doing so it would be beneficial for the borrower as it would save them money. For us, by adjusting the loan balance to move the late fees into the unpaid principal balance, it now increased the value of the loan if we were to sell it on the secondary market.
Since the modification the borrower continues to make payments and will now have the loan paid off faster because of the modification, and for 7E we have an asset which is more valuable because of the modification.
- A broker we work with often presented the opportunity to us, to fund a business purpose loan on a high end asset in Palm Beach, FL
- He agreed to originate the loan and we purchased the loan from him shortly thereafter
- 13.5% with 2 pts going to us
- 12 months, with two 3-month extensions at a cost of 1pt each
Invest with 7E
Why 7E? For those investors who invested early on, a $100,000 investment with 7E which started accruing interest in August would have received over $3,000 in dividends through Jan 1, 2023. A $100,000 investment in the S&P 500 during this time would have a valuation of $92,500 which is 11% lower than 7E in the span of six short months. Where do you think the markets are headed in 2023?