how to invest in nonperforming mortgages for financial & social gain 5 12 2015

American Homeowner Preservation, LLC


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How To Invest In Nonperforming Mortgages for Financial & Social Gain

May 12, 2015

2


The Opportunity

Foreclosure crisis now concentrated in low- and moderate income-neighborhoods

U.S. market of over $300B in underwater mortgages, close to 20% of mortgages; in Ferguson, MO: 51%

First Mortgages sold at a percentage of home value, often 30 – 80% (sub-75K value homes often at sub-50%

Social Impact

538 468 $57M

$2.8MHomeowners

Retained Vacant Homes Back In Service

Negative Equity Extinguished

Annual PaymentSavings

3


Delinquent Taxes

What to Look For

Social Impact

538 468 $57M

$2.8MHomeowners




Value of the Property

Title Report

File Review

4


Sources

Social Impact

538 468 $57M

$2.8MHomeowners




Kondaur Capital

Security National

Gemini

5


AHP Bidding Formula

Social Impact

538 468 $57M

$2.8MHomeowners




Value = The lower of the BPO or UPB

Value Bid

< 15k 20% of Value

15k - 25k 25% of Value





> 65k 50% of Value

6


Learn the Terms

Social Impact

538 468 $57M

$2.8MHomeowners




Unpaid Principle Balance

Broker Price Opinion

Tax Sales

Next Payment Due Date

Delinquent Taxes

Allonge

Assignment

NPL

Mortgage

Note

7


Team of Experts

7

Jeff BlumbergPartner, Ulmer Bern

Joseph McKoski

SS&G

Jeff concentrates his practice on investment management law and counsels clients on regulatory, organizational, structural and business matters for a variety of registered and unregistered money managers, including hedgefund managers, investment advisers, broker-dealers, commodity trading advisors, and commodity pool operators. Jeff is a guest lecturer at the Northwestern University School of Law and is a frequent speaker at industry conferences on topics relating to hedge funds and registered investment advisers.

Joseph is a senior associate in the tax department at SS&G. Prior to joining SS&G, Joseph was at Hobe & Lucas, CPAs where he was a staff accountant responsible for various types of tax returns and leading audits. Joseph earned his bachelor's degree in accounting from The University of Akron. SS&G is one of the nation's largest independent accounting and business consulting firms with offices in Ohio, Illinois, Kentucky, and New York.

Brian serves as Senior Portfolio Manager, and is the architect behind AmericaVest Capital Management’s core investment strategy. For the past 10 years, Mr. Plunkett has been the Fund Manager of more than 50 individual real estate backed investment funds. AmericaVest Capital Management is a full-service, on and off balance sheet lender with a real estate investment trust (REIT) mortgage structure in place and specializes in small- to middle-market commercial loans nationwide.

Brian Plunkett Senior Portfolio Manager,

AmericaVest Capital Management, LLC

8


Team of Experts

8

Author Weissman WealthForge

David joined SN Servicing Corporation in February 1997, as the Senior Vice President/Managing Director of Acquisitions. David managers and operates the SN Servicing Trading Desk. He has more than 22 years of experience in the Analyzing, Negotiating and Acquiring of Performing, Sub-performing, and Non-Performing residential and Commercial assets. He hold a Master of Business Management and a Bachelor of Arts Degree in Business Management.

Arthur is an industry expert leading the transformation of private investing from “offline” to “online”. At WealthForge, Arthur heads sales and marketing helping to make raising private capital cheaper, faster and easier than ever before. Today, WealthForge is the only licensed broker-dealer offering a full suite of online investment products that touch on every aspect of the new, online private equity marketplace and more than $50 million dollars has been invested using WealthForge’s platform.

David PollioManaging Director,

Security National Master Holding Company

BROKER-DEALERTRUSTEE & DOCUMENT CUSTODIAN

SERVICER

9


AHP Evolution

2008

2009

2011

2013

2014

AHP opens office in Cincinnati, OH and is awarded 501(c)3non- profit designation by IRS

AHP transitions to for- profit, pioneers short sale lease- back as foreclosure remedy

AHP moves to Chicago, IL and transitions to socially responsible hedge fund

AHP buys first pool of nonperforming mortgages

AHP evolves into online investment community to do well by doing good

Establishes in- office branch of Security National Servicing, licensed nationwide

Affiliates with WealthForge,a licensed broker-dealer

10


Underwriting

Risks

Valuations Local Agents

Title Abstrax

Property Taxes

Black Knight

Collateral File Reviews AHP

Analysis Operative

AHP buys mortgages at an average of less than 50% of current property values

• Inaccurate Valuations• Undetected Property Damage/Vandalism• Unsecured Mortgages• Unexpected Liens/Title Issues • Delinquent Property Taxes• Tax Sales • Missing & Deficient Notes, Security Instruments, Title Polices, Assignments , Allonges

This Is a Business of Solving ProblemsTo Generate Solid Returns, We Must Uncover The Problems Before We Buy

11


A Simple Solution

Borrower Laid Off From 17- Year Job

$164,000 MortgageOriginated

2003

2012

2013

2014

Dec: ModificationDenied; FC Sale Set

Maywood, IL

2007

$32,000

Property Value

$200,000

2010

ForeclosureStarted

July: Applied To ServicerFor Modification

Jan: AHP Purchased For $9,600

Feb: AHP Modified =

$9,600 Loan Acquisition Price

2014 : 54% first-year return$2,000 to cure delinquency$3,200 10 x $320 payments$5,200 Next 18 years: 40% annual return$3,840 12 x $320 payments

12


High Performance Strategy

American Homeowner Preservation FundNovember 2011 – November 2013 Predecessor Entity / Same Management

How To Make Money How To Lose Money• Expeditious, Respectful Borrower Outreach• Simple, Formulaic Solutions • Minimal Documents for any Solution• Consensual Solutions Minimize Legal Costs• Use Foreclosure as a Tool to Provoke Response• In- House Servicer Branch• Customer Service in Chicago• Loans Held in Trust with U.S. Bank as Trustee

“You Don’t Have To Litigate With Us To Get A Good Deal. We’ll Give You The Good Deal Upfront”

– CEO Jorge Newbery Bloomberg Business, March 2014

• Abrasive Collection Efforts• Complicated, Customized Solutions • Paper Circus Required for any Solution • Protracted Borrower-Lender Wars Amplify Legal Costs• Foreclosure as a Tool to Acquire Real Estate • Outsource Servicing• Customer Service Overseas• Loans Held in Unlicensed Entity

2012 14.6%* $6,125,9982013 14.5%* $6,295,8812014 9%*, 10.2%*, 12%* $8,177,367

Non- Performing Mortgages Lose Value DailyDue to Collateral Deterioration & Tax Accruals; Rapid Resolutions Are Critical

Investor Return Capital

Transitioned to closed-end fund structure in late 2013

*Past performance is not indicative of future performance.

13


Series 2014B Loans to be Acquired

Seller: Big Bank

Total Debt: $12,739,319

Total Property Value: $8,483,443

Acquisition Cost: $3,839,122

Cash Flow Last 12 Months: $799,883

$55,812 average property value

45% acquisition to value

20% + annual return on last 12- months of existing cash flow

Seller: Major Subprime Issuer

Total Debt: $27,809,986

Total Property Value: $6,276,550

Acquisition Cost: $1,000,000

$26,882 average property value

16% acquisition to value

54% of files have extreme issues: HOA Foreclosures, Tax Problems, Title Issues

14


Transaction Flow

Investors $

Homeowner $

Approve All $$$ Distributions

Expenses, Management

Pool Sellers

NDH Group, Ltd.Review All Investors

Approve All $$$ Distributions

NDH Group, Ltd.

Fund AdministratorBroker- Dealer

Servicer

Assets & Documents

Payments & SalesDistribution Bank Account

Trustee &Custodian

15


AHP in the Media

15

"Profit + Purpose: American Homeowner Preservation Proves That Socially Responsible Investing Can Yield a Healthy Return"

“They’re a lot more flexible than a bank,” said Ragusa, 48, who ran into financial trouble after losing his job in collections for a cable company in 2007. “They can work with you because they’re a private company and they can basically set their own rules.”

"...you have American Homeowner Preservation using private investor money to buy up mortgage pools and give the borrowers the solutions they need, not the ones that maximize profits for the company...it's an exciting development, and it shows you can do well and do good at the same time. Frankly, it's what the government did with the Home Owners Loan Corporation in the 1930s, and what they should be doing today."

"AHP over the years had evolved into a sort of socially conscious hedge fund. Jorge is relentless, probably steeled in part by his athletic competitiveness, and has continued to press the case for AHP's vision, and, along the way his work has caught the attention of major bloggers like Arianna Huffington, Felix Salmon and Martin Andelman. AHP is hoping to demonstrate that they have better ideas to ameliorating the foreclosure disaster"

FEATURED IN

16

American Homeowner Preservation, LLCAmerican Homeowner Preservation, LLC

DISCLAIMER*Past performance is not indicative of future performance. This investment entails a high degree of risk. No returns are guaranteed.

This communication is intended only for those persons with an in-depth understanding of the high-risk nature of alternative investments. The communication is general in nature and should not be considered a full statement of the facts pertinent to this message. The investments shown herein may not be suitable for you. This communication is intended for, and specific to, the person to whom it was sent. The document may not be distributed in either excerpts or in its entirety beyond the intended recipient. American Homeowner Preservation, LLC. ("American Homeowner Preservation") will not be held responsible if this document is used or is distributed beyond its initial recipient or if it is used for any unintended or unauthorized purpose. All investors should make their own determination of whether or not to make any investment, based on their own respective independent evaluation and analysis.

To the knowledge of the sender, this document and the relevant pages herein are: (i) current as of the date of distribution; (ii) subject to change without notice; (iii) directed solely at eligible accredited investors; (iv) not directed at, may not be suitable for, and should not be relied on, by general retail clients. American Homeowner Preservation does not do any of the following: (a) produce in-house research; (b) make recommendations to purchase or sell specific securities or provide investment advisory services. All prospective investors are highly encouraged to retain and consult with their own respective independent legal counsel, tax and financial advisers, investment advisers and accountants.

By reading this communication, you hereby acknowledge that you are an accredited investor. If you are a general retail client, then this communication is not intended for you. Alternative investments may not be suitable investments for you. You may not possess the sophistication to rely on the contents of this communication, and in such case, you should either shred or return the communication and document to American Homeowner Preservation. Neither American Homeowner Preservation nor any of its directors, officers, employees, representatives, affiliates or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in, or lack of care in its preparation or publication, the material and communication herein.

American Homeowner Preservation, LLC is not a registered broker-dealer, funding portal, or investment advisor and does not conduct any activity that would require such registration. Equity securities are offered through WealthForge, LLC, a Virginia limited liability company (“WealthForge”), which is a securities broker/dealer registered with the U.S. Securities and Exchange Commission and a member of the Financial Industry Regulatory Authority, Inc. Individual personnel of American Homeowner Preservation, LLC are registered representatives of WealthForge. WealthForge has developed a business continuity plan on how they will respond to events that significantly disrupt business. WealthForge is located at 6800 Paragon Place, Suite 237, Richmond, VA 23230, tel: (804) 308-0431.

how to invest in nonperforming mortgages for financial & social gain 5 12 2015

Business

value homes

annual payment savings

vacant homes

social impact

service negative equity

upb value bid

percentage of home value

llc sources