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Lending

Enhancing Lending Solutions

New Integrations in Liquid Logics Platform By Sam Kaddah In the fast-paced world of private lending, efficiency, security, and reliability are paramount. Private lenders need robust tools to streamline their processes and mitigate risks. Borrowers seek a seamless experience, while investors demand transparency and security. Liquid Logics, a leader in lending solutions, is excited to announce two powerful integrations into our platform: construction fund control and risk management analytics and background screening services. These new features are set to revolutionize the loan origination process, bringing enhanced security, reliability, and efficiency to private lenders, borrowers, and investors alike. Construction Fund Control: Ensuring Financial Oversight and Transparency One of the most significant challenges in construction lending is managing the disbursement of funds. Ensuring that funds are used appropriately and that construction projects stay on track is critical to minimizing risk. The integration of construction fund control into the Liquid Logics platform addresses these challenges head-on. With construction fund control, private lenders can maintain meticulous oversight of how funds are allocated and used throughout the construction process. This crucial functionality provides detailed tracking of each disbursement, ensuring that funds are released only when specific project milestones are met. This level of oversight helps to prevent misappropriation of funds and ensures that projects are completed on time and within budget. Increased transparency and accountability benefit both borrowers and investors. Borrowers can see precisely when and why funds are released, fostering trust and collaboration between lenders and borrowers. Investors, on the other hand, gain confidence knowing that their investments are managed responsibly and that projects are progressing as planned. This transparency is crucial for maintaining investor trust and encouraging future investments. Risk Management Analytics: Proactively Identifying and Mitigating Risks Risk management is a cornerstone of successful lending. Identifying potential risks before they become issues can save lenders significant time and money. Risk management analytics equips lenders with powerful tools to assess and mitigate risks effectively. Risk management analytics leverages advanced algorithms and data analytics to evaluate potential risks associated with each loan application. By analyzing a wide range of factors, including borrower creditworthiness, project feasibility, and market conditions, lenders have a comprehensive risk profile for each loan. This proactive approach enables lenders to make informed decisions and take preventive measures to mitigate identified risks. Once a loan is approved, continuous monitoring is essential to ensure that emerging risks are identified and addressed promptly. The risk management analytics integration offers real-time monitoring of loan performance and market conditions. Lenders receive alerts and insights into any changes that could impact the loan, allowing them to take swift action to mitigate risks. This dynamic risk management approach helps protect lenders’ interests and ensures the long-term success of their lending portfolios. Background Screening Services: Enhancing Security and Reliability Trust is the foundation of any lending relationship. Ensuring that borrowers and other stakeholders are trustworthy and reliable is crucial for maintaining the integrity of the lending process. Background screening services provide lenders with the tools they need to conduct thorough due diligence. The background screening services integration enables lenders to perform comprehensive background checks on borrowers, co-signers, and other key stakeholders. These checks include criminal history, credit reports, employment verification, and more. Through thorough due diligence, lenders can identify potential red flags and make more informed lending decisions. In addition to verifying the reliability of borrowers, background screening services play a crucial role in fraud prevention. By cross-referencing information and identifying discrepancies, the platform helps to uncover potential fraud schemes before they impact the lending process. This enhanced security measure protects lenders from fraudulent activities and ensures that only trustworthy borrowers receive funding. Streamlined Processes and Improved Efficiency The integration of construction fund control, risk management analytics, and background screening services enhances security and reliability and significantly improves the efficiency of the loan origination process. All new features seamlessly integrate into the existing Liquid Logics platform, providing a unified and user-friendly experience. Lenders can access construction fund control, risk management analytics, and background screening services, streamlining their workflows and reducing the time and effort required to manage loans. Automation is a critical component of the new integrations. The platform automates many of the tasks associated with fund control, risk assessment, and background screening, reducing the burden on lenders and speeding up the loan origination process. By automating routine tasks, lenders can focus on more strategic activities, such as building relationships with borrowers and investors and growing their lending portfolios. A New Era in Lending Solutions The integration of construction fund control, risk management analytics, and background screening services into the Liquid Logics platform marks a significant milestone in the evolution of lending solutions. These new features bring unparalleled security, reliability, and efficiency to the loan origination process, benefiting private lenders, borrowers, and investors alike. Private lenders can now enjoy enhanced financial oversight, proactive risk management, and comprehensive background checks, all within a single, user-friendly platform. Borrowers benefit from increased transparency and trust, while investors gain confidence in the responsible management of their investments. At Liquid Logics, we are committed to providing innovative solutions that address the evolving needs of the private lending industry. The new integrations are a testament to our dedication to enhancing the lending experience for all stakeholders. Contact us today to learn more about how these powerful new features can transform your lending operations and drive success in the competitive world of private lending. Staying true to our mission and dedication to continue to be the industry leader addressing the ever-evolving needs of the private lending industry, Liquid Logics is releasing a suite of tools and key integrations. Our clients are now able to perform real-time live background checks, asset, and account statement balances, draws, and fund controls through AI, as well as KYC, OFAC, and identity verifications. As the industry’s needs evolve, you can rest assured that Liquid Logics tools will keep up with your needs. SIDEBAR Liquid Logics is a Founding Member of the National Private Lenders Association. Join us for the NPLA Conference

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Streamlining Nonbank Real Estate Transactions

Engage with Reliable and Thoroughly Vetted Industry Partners By Amy Kame and Jonathan Gearhart In the nonbank lending industry, the successful closure of a loan heavily relies on a number of stakeholders to work together to achieve a common goal. Borrowers, lenders, brokers, real estate agents, law firms, and title companies all depend on one another, and these entities play pivotal roles in ensuring transactions are executed efficiently and securely. Together, they form a partnership that safeguards the interests of all parties and ensures a smooth, secure transaction process. This collaboration is essential in a market characterized by its swift pace and complex transactions. Private Lender Law — Identifying a Problem  Private Lender Law (PLL) is a leader in the nonbank lending industry, offering an extensive array of legal services tailored specifically for private lenders. Operating from New York City and New Jersey, PLL has carved out a niche as the go-to national law firm for lenders across the United States. Their expertise encompasses a wide range of areas, including foreclosures, loss mitigation, and efficient closings. With a client base of over 100 lenders nationwide, PLL is dedicated to delivering personalized and dependable legal solutions in all 50 states. During the loan closing process, PLL finds itself working with the key stakeholders through phone calls, emails, and, in some cases, as many as 50 or more communication touch points to close a loan. Given the importance of each deal to all involved, it is imperative that everyone clearly understands their role in the closing process, and of equal importance, the nuances of private lending. These transactions are unique and require experience to close efficiently. As the team at PLL grew its business and worked with more of the private lending community, a pattern began to develop. One stakeholder in the deal increasingly caused more friction than the others, and the lack of private lending experience too often kept deals from moving forward. That stakeholder was the title company. Why Title? The title company guarantees that the property title is clear of any encumbrances or liens that could jeopardize a deal. Title companies can be relatively small, having 3-5 employees and working in one market, but also large organizations employing hundreds and operatingin many states. The title companies most often seen by the PLL team in their daily work are those working in a single market, often mirroring the borrowers who most often use private lending for their real estate financing needs. The “1 market” title company often does not operate at scale and makes traditional purchases and refinances along with the occasional private lending deal. Experience is limited, and the PLL team often must explain and re-explain lender requirements for title. This slowed enough deals down over time that the PLL team had to explore a way to better service their clients, enter Private Lender Title. The Creation of Private Lender Title Private Lender Title (PLT) is a distinguished provider of title and settlement services specializing in the private lending sector. With extensive experience and a focus on the nonbank real estate lending industry, PLT provides comprehensive title searches, issues title insurance, and manages the settlement process. Their expertise helps streamline closings and safeguards lenders and their investments against potential legal issues. This support system is vital in today’s real estate market, where the accuracy and speed of title services can significantly impact the success of transactions. Private Lender Title is strategically positioned to transform the title service landscape for private lenders through its collaboration with Private Lender Law. This alignment ensures a seamless integration of legal and title services, enhancing the support system available to lenders throughout the loan process, not just at closing. Drawing on the extensive experience of Private Lender Law, which has worked with thousands of title companies across all states, PLT has crafted a title workflow designed to mitigate inconsistencies and inefficiencies in our industry. Addressing the Persistent Threat of Fraud The Private Lending industry faces challenges from the persistent threat of fraud and operational risks posed by insufficiently vetted partnerships. Recent developments involving major title companies like Riverside Abstract and Madison Title have brought attention to issues within the title industry. According to a memo from Fannie Mae’s deputy general counsel, Jeff Goodman, both companies are prohibited from participating in any Fannie Mae-related mortgage loan closings due to their involvement in fraudulent real estate closings orchestrated by Boruch Drillman, as deemed by the Department of Justice. This highlights the importance of engaging with reliable and thoroughly vetted partners in the industry. The ongoing issue of fraud further complicates the landscape, as detailed in the FundingShield Q1 2024 report, which underscores a sector with vulnerabilities. Nearly half of all transactions exhibited potential fraud risks, with common forms including identity theft, fake loan applications, and counterfeit documents. The report revealed that problematic loans averaged 2.22 issues each, signaling a lack of adequate controls by closing agents and lenders to identify and correct these discrepancies. Additionally, 9.2% of transactions were flagged for wire risks, and there was a 9.8% incidence rate of issues in CPL (Closing Protection Letters) validations, pointing to sophisticated and evolving fraud techniques that pose significant financial risks. The repercussions of partnering with entities that fail to uphold legal and ethical standards are severe, affecting not just the immediate transactions but also the broader credibility and operational capabilities of lenders in the market. As the industry continues to evolve amidst these challenges, the role of reliable partners who can ensure that transactions are executed with proper due diligence is more vital than ever. The Role of PLL and PLT in Enhancing Efficiency and Security The demand for a streamlined, secure transaction process has never been higher. Together, Private Lender Law and Private Lender Title create a partnership that anticipates the needs of lenders facing the dual challenges of a fast-paced market and increased fraud. This section describes how PLL and PLT collaboratively enhance both efficiency and security in real estate transactions, providing support

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Empowering Lenders and Originators

The Future of Capital Markets Operations is Here By Stuart Wall With housing inventory at an all-time low, there is a growing opportunity for many Residential Transition Loans (RTL) investors. This opportunity has been stifled in the last 18 months by interest hikes and the uncertainty of when market conditions will settle or improve. These same market dynamics have led to a boom in private credit that brings its own growth and logistics pains. While riding out the uncertainty or riding the growth wave brings different sets of problems to lenders and originators, focusing on strategy and operations through technology can ultimately help lenders and originators alike win. In the rapidly evolving world of debt financing, capital optimization is crucial for maintaining competitiveness and ensuring sustainable growth.  Enter Setpoint, the capital markets operating system designed to improve the way teams operate. With its continual growth, highlighted by a recent partnership with Wells Fargo, Setpoint is poised to set a new standard in operational efficiency and liquidity. A New Era of Lending Efficiency Setpoint’s platform includes a suite of products, services and capital that help lenders scale. By integrating with both lenders and originators, Setpoint improves the funding process by focusing on data standardization, automated calculations and reporting, and third-party diligence while ultimately reducing time to fund. For lenders, Setpoint standardizes borrower data, reconciles calculations, and manages Asset-Based Lending portfolios. This is done through real-time analytics and loan-level data tracking that gives more precise portfolio ownership. The platform’s portfolio modeling tools are pivotal in optimizing new credit facilities, projecting IRR, automating facility reporting, and providing a centralized platform for all funding operations and borrower activities. Fulfilling new funding requests is at the heart of the platform, bringing operational efficiency and security to a once manual process. Lenders can review and approve funding requests entirely on the platform. Advance rate step-down schedules, required reserve amounts, and funding logic are configured for each facility and amendment, removing the need to reconfirm compliance to the credit agreement with each request. An audit trail of historical requests and approvals are a click away and plainly documented and then stored for future reporting processes. Once implementation is complete, data ingestion is instant and error free removing manual data transfer processes — no more email threads and FTP folders. Whether pulling data via API or spreadsheet, Setpoint works with lenders directly to ensure standardization and accuracy throughout the portfolio. Lenders can even view any asset’s collateral and funding or advance step-down history without leaving the platform. While using Setpoint, clients see the time to fund drop by 50%, resulting in higher utilization across borrowers. Lenders also lower the time spent monitoring borrowing base and facility compliance with custom alerts and portfolio views. Each facility’s concentration limits and buy-box criteria are monitored in real time with access to individual asset details that contribute to each limit. The platform also automatically tracks the completion of borrower’s recurring financial deliverables, such as monthly financials or compliance certificates, for improved risk management procedures. Additionally, lenders gain access to more frequent and accurate portfolio reporting with enhanced risk analysis and forecasting abilities. Standardized reporting across facilities enables lenders to analyze portfolio performance and risk by funding vehicles. Additionally, lenders can use real-time dashboard views to track metrics such as outstanding commitments, current utilization, or upcoming advance step-downs for cash management, utilization, and for monitoring borrower trends over time. With Setpoint, you can automate workflows and reporting to focus on driving portfolio growth. This approach helps lenders achieve their best work by funding transactions within 24 hours all while managing over $18 billion in transactions annually. Accomplishing this level of efficiency at scale is crucial for lenders looking to improve their market responsiveness and operational agility. By enhancing standardization and liquidity, the platform builds trust and efficiency in the credit system. Eliminating Errors and Enhancing Liquidity As Setpoint manages the end-to-end capital markets process, lenders and borrowers can operate together on-platform. With Setpoint’s Capital OS product, originators can accelerate capital allocation, instantly reduce operational risk, and automate lender management. For originators, it starts with configuring the technology and services to meet individual facility needs. During implementation, seasoned capital markets and engineering teams review everything from facility data structures to eligible asset criteria and data security. Each facility is configured according to the credit agreement’s buy-box and concentration limit requirements. Adding additional facilities is painless and presents new asset allocation optimization features. Once implemented, the platform similarly allows originators to streamline funding operations with automated data ingestion, calculation and reporting workflows, and overall asset management. They can run any number of allocation scenarios or leverage an AI-driven engine to determine optimal asset allocation. Originators can even access real-time Third-Party Reviews and certifications, thus improving capital access while ensuring compliance. All necessary funding operations tooling or services can be found directly on Setpoint. Trust and Efficiency with Wells Fargo Setpoint’s support for a wide array of asset classes, including auto loans, consumer loans, equipment financing, Residential Transition Loans (RTL), Single Family Rental (SFR), Small and Mid-sized Businesses (SMB), solar loans, etc., positions the platform as a versatile tool across any sector. This versatility ensures that regardless of the market segment lenders focus on, Setpoint has the capability to enhance their operational and financial performance. The recent partnership with Wells Fargo is a significant milestone for Setpoint and a testament to the platform’s reliability and efficiency. This collaboration not only enhances the technology’s credibility but also offers counterparties access to a wider network and greater opportunities.  More specifically, as Wells Fargo’s Third-Party Calculation Agent, Setpoint approves and certifies borrowing requests, monthly payments and investor reporting. In the role as Third-Party Paying Agent, Setpoint facilitates client payments via the technology platform by issuing payment instructions, as authorized by Setpoint’s clients, to account banks where funds are held or are to be transferred. The partnership is poised to boost confidence among lenders and originators, signaling that Setpoint’s technology is not only innovative but also trusted by leading

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Navigating Financial Distress in Real Estate

The Power of Rescue Capital Loans By Ruben Izgelov After a prolonged period of elevated interest rates, many investors are experiencing higher-than-budgeted interest obligations. Many investors are unable to refinance maturing debt because their properties do not cover the debt servicing requirements used by most lenders. An emerging solution for what we forecast will continue to be a tremendous hurdle impacting investors in 2024: rescue capital loans. Rescue capital providers stand out for their ability to offer a lifeline to real estate investors in distress. A nationwide Private Lender and member of the National Private Lenders Association (NPLA), We Lend, offers a Rescue Capital Program as an innovative solution for property owners facing foreclosure. The program is specifically designed to offer a timely and efficient financial buffer. In the current economic landscape marked by uncertainty and fluctuating market dynamics, the role of rescue capital has become increasingly pronounced. With the Federal Reserve’s interest rate hikes as a response to inflation, the cost of borrowing has significantly increased. This shift has particularly affected real estate investors, who now face the challenge of refinancing their debts amidst a tightened lending environment. Rescue capital loans, often a lifeline in such scenarios, are becoming a go-to solution for many investors. These loans are particularly crucial in bridging the gap during times when traditional funding sources become inaccessible or too costly. The Rising Need for Rescue Capital in Real Estate The rise in foreclosure rates stemming from an inability to refinance COVID-era bridge loans has thrust the need for a prominent rescue capital program to the forefront of investors’ minds. We Lend’s program, and those like it, have become an essential cog in sustaining a healthy real estate ecosystem. The recent increase in foreclosure rates is a direct consequence of the economic aftershocks of the pandemic and subsequent inflationary pressures. Many real estate investors, particularly those who had leveraged their investments based on pre-pandemic market conditions, now find themselves in a precarious position. This is especially true in areas where the real estate market has not rebounded as expected or where rental incomes have decreased. As a result, the demand for rescue capital has surged, offering a critical financial lifeline to these investors. This type of financing is particularly crucial in areas where property values remain high, but cash flow has been disrupted, such as in many urban centers. Understanding Rescue Capital Loans Rescue capital loans are designed to provide swift financial assistance to real estate investors facing foreclosure or other financial distress. They offer a means to quickly access capital, often with less stringent underwriting requirements than traditional financing options. We Lend’s Rescue/Foreclosure Bailout Program caters to a wide range of property types and can offer up to 65% LTV (Loan to Value) on commercial properties and a loan term of up to 36 months. The NPLA defines LTV as: “The ratio of the principal amount on a mortgage to the appraised value of the collateral property. The ratio is commonly expressed to a potential borrower as the percentage of value a lending institution is willing to finance. The ratio is not fixed and varies by lending institution, the borrower’s credit history, the property type, geographic location, size, and other variables. The ratio will change over time as the loan balance and valuation change and is used as a measure of risk on a secured loan (higher LTV ratios are reflective of higher risk).” We Lend and private lending programs like it, stand out for their ability to close deals within days, not weeks or months, which is often the critical difference in preventing foreclosure. In a market where traditional lenders are increasingly risk-averse, rescue capital loans are characterized by their flexibility and speed. They typically have more lenient underwriting standards, focusing more on the value of the property rather than the owner’s creditworthiness. This approach is particularly advantageous for investors who may have sound assets but are temporarily cash-strapped. For example, an investor owning a multi-family property in a gentrifying neighborhood may find traditional refinancing options unavailable due to the transitional nature of the area. In such cases, rescue capital loans can provide the necessary funding to bridge the gap until the property’s income stabilizes or the area’s market dynamics improve. The Economic Context and Market Trends The demand for rescue capital is also influenced by broader economic trends, including fluctuations in the job market, changes in consumer behavior, and shifts in housing demands. For example, the rise of remote work has led to a decline in demand for office spaces in urban centers, impacting investors in commercial real estate. The changing landscape of commercial real estate, particularly in the context of the pandemic and the shift towards remote work, has had a profound impact. Traditional office spaces, once considered prime real estate assets, are now facing reduced demand. This shift has left many investors with properties that are not generating the expected revenues, thus increasing their need for alternative financing solutions like rescue capital. Moreover, the retail sector is also experiencing a transformation, with an increase in e-commerce leading to a decreased demand for brick-and-mortar store spaces. Investors in these sectors are finding rescue capital to be a viable option to reposition their assets, whether it is converting retail spaces into distribution centers or transforming office buildings into residential or mixed-use properties. Success Stories and Case Studies The true impact of rescue capital loans is best understood through success stories. One such case involved a commercial property owner facing imminent foreclosure. Through the Rescue/Foreclosure Bailout Program, the client was able to secure $2.5 million within a week, saving the property and allowing for a strategic repositioning. Stories like these underscore the program’s value in giving property owners not just financial aid, but also peace of mind and stability. Another example is a residential developer who, facing delays and increased construction costs due to supply chain disruptions, utilized rescue capital to complete the project without sacrificing quality or missing key market opportunities.

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The Future of Private Lending

Institutional Investors & New Lending Models Are Reshaping the Industry By Cory Nemoto Private money as we know it today is not what it was less than a decade ago. Within the past decade alone, the private lending space has evolved, changed, and gone through multiple cycles. In that time, private lending has shifted from being solely a niche endeavor; today, it stands as an institutionalized force, presenting fresh opportunities for smaller lenders to emerge and provide value to the market. The shift towards institutionalization has been a pivotal turning point in the private lending space. Once considered a ‘mom and pop’ venture, the industry now assumes a professionalized approach that has attracted investors and borrowers alike. With this evolution, a range of innovative lending models, such as White Label and Correspondent Lending, has emerged, revolutionizing the way funds are channeled to borrowers. Not too long ago, the very concept of White Label and Correspondent Lenders did not exist in the private lending industry. However, with the industry’s expansion and diversification, these terms have taken center stage and transformed the private lending landscape altogether. White Label Lenders White Label lenders are a relatively new type of private lender that has been gaining popularity in recent years. In its valiant pursuit to unify and advance the Private Lending industry, The National Private Lenders Association (NPLA) has created the Private Lending Glossary, which defines a White Label Lender as: “A company that provides loan products or services under its own branding but relies on a third-party provider for underwriting, closing, funding, and servicing. This arrangement allows the white-label lender to offer a range of loan products without directly arranging warehouse financing or developing the infrastructure and expertise required to manage the entire lending process in-house. The third-party provider typically operates in the background, enabling the white-label lender to focus on marketing, customer acquisition, and building its brand.” As the landscape of lending continues to evolve with the emergence of these innovative lenders, it becomes imperative to delve into the advantages and potential drawbacks associated with these lending models. A few benefits of working with a White Label lender  »         Relationship // Since White Label lenders typically work solely on the origination side of the lending process, they are able to focus on building the relationship directly with the borrower and map plans to help them grow and scale their business with the proper leveraging of private capital given their current financial situation.  »         Flexibility // White Label lenders offer a variety of loan products, which can give borrowers more options to choose from.  »         Expertise // Since White Label lenders typically work with multiple capital providers, they need to be very knowledgeable of many different credit boxes, guidelines, and closing processes. They need to be aware and adapt as each provider’s boxes and guidelines change with the market and current economic conditions.             White Label Lenders also work on the frontlines directly with borrowers, so they typically have real time knowledge and a good read on the industry as a whole, from both the lenders and borrower’s perspectives. Potential drawbacks to working with a White Label lender •          Longer Closing Times // Since White Label lenders are held to third party processes, underwriting, and final approvals, it is not uncommon to see White Label lenders with slightly longer closing times. •          Higher Fees // White label lenders may charge higher fees than working with a Direct Lender. •          Limited Authority // White Label lenders do not have ultimate control or authority in whether or not a loan gets funded. Therefore, White Label lenders have no authority to make exceptions. If there are any exceptions needed on the loan, then the decision will ultimately be determined by the White Label lender’s capital provider. Correspondent Lenders Correspondent Lenders are another type of lender that have been around for many years and have made their way into the private lending industry. More commonly seen in the conventional lending space, these lenders originate and fund loans on behalf of a larger lender, such as a bank or mortgage company. The larger lender or investor then purchases the loans shortly after closing (NPLA Glossary). The institutionalization of capital in the private lending industry has birthed a market for new Correspondent Lenders to form and now participate in originating non-owner occupied private loans against real estate. Benefits of working with a Correspondent Lender •          Wider Range of Loan Products // Correspondent Lenders often have access to a wider range of loan products than direct or retail lenders. This can be helpful for borrowers who need different types of loan products from short-term fix and flip bridge loans to long-term DSCR loans. •          Flexible & Creative // Correspondent Lenders typically have multiple options for take-out partners, or investors and institutions to sell their loans to and recapitalize. They also have the option of holding the loan on their books. Therefore, Correspondent Lenders have some freedom to be flexible and creative with their lending products. •          Full Authority // Since Correspondent Lenders typically fund loans with their own capital, or their own access to capital, they have full authority to make exceptions and fund a loan. Potential drawbacks to working with a Correspondent Lender •          Higher fees // Correspondent Lenders may charge higher fees than traditional lenders. This is because Correspondent Lenders have to cover the costs of originating and funding the loan, as well as the costs of selling the loan on the secondary market. •          Consistency // Since the Correspondent Lender (in a normal market) may intend to sell the loan to different take-out partners, their process and requirements of the borrower may differ and change on a deal-by-deal basis. •          Subject to capital market conditions // Correspondent Lenders take on more risk than White Label lenders and are tied very closely to the capital markets making their leverages, pricing, and ability to lend vulnerable to major economic events as we’ve seen in recent years with COVID-19

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Spotlight On Residential Real Estate Investment Loans

by Eric Atlas Residential Investment Loans (“RILs”) are business purpose loans secured by “fix and flip” or rental properties owned by professional investors and secured by 1st lien mortgages. Bridge loans are short-term loans (usually 6 to 24-months in duration, with an average life of less than a year) to property investors who buy, renovate, and sell homes for profit (the aforementioned fix and flip investments) or lease, refinance and hold longer term. Man Global Private Markets (“Man GPM”) both provides senior credit facilities to RIL loan originators and purchases RIL whole loans, with a current focus on bridge loans of ~$350-500 thousand on average, with a loan to cost ratio (“LTC”) between 75-85% and post-renovation loan to value ratio (“LTV”) between 65-75%.  HISTORICAL PERSPECTIVE The RIL market has historically flown under the institutional radar due to a variety of structural factors and investing trends. Historically, originating/processing RILs has been challenging for large banks and other institutional players. Due to the small loan balance, operational intensity, scaling difficulties and shorter loan duration, RILs can be too high touch for some lenders’ origination and operational capabilities. The second reason is that RILs are “commercial” loans with “residential” collateral. As such, there has not been a natural home for these assets on many trading desks. Lastly, these loans often do not qualify for inclusion in Fannie Mae or Freddie Mac pools. Government-Sponsored Enterprises’ (“GSEs”) qualifications in the space have historically been focused on a borrower’s debt to income (“DTI”) ratio, which limits the amount they can borrow, rather than the asset-based approach employed by most non-bank lenders in the space. Therefore, the RIL market was traditionally dominated by local/regional lenders (e.g., hard money and “mom-and-pop” lenders). Naturally, where there was limited capital, there was limited origination. As a result, the market stayed relatively small, leverage stayed relatively low, and rates were high (e.g., low double-digits for bridge loan originations). Despite this, the underlying credits were quite strong as borrowers tended to be experienced property investors. Since 2015, institutional capital, led in part by Man Group—one of the first institutional players to enter the space—has become increasingly interested. This interest has resulted in the creation of a robust secondary market and originator access to institutional financing (through warehouse lines and securitizations). As more institutional capital entered the space, originators grew, and competition increased. Prior to COVID-19 hitting, the RIL market had matured, but was still fragmented, offering outsized yields compared to other residential mortgage asset classes. However, due to the COVID-19 outbreak, early 2020 presented new challenges to the RIL market, with originators, loan buyers, and borrowers all facing new issues. Loan originators faced liquidity concerns as the secondary markets froze; buyers feared stay in place orders would reduce demand for real estate assets; and borrowers were unable to get home improvements done quickly and safely without risk of getting or spreading the virus. Despite the new challenges, as the pandemic spread, the US housing market (and with it the RIL market) rallied, with demand for homes increasing. With COVID-19 accelerating millennials’ move to suburban single-family homes, remote work opportunities arising, and growing social distancing, backyards and other home amenities became increasingly desirable. As the real estate market rallied, institutional allocations to real estate assets followed, increasing 10bps year on year, from 10.5% to 10.6% of overall allocations. Coming out of COVID-19, the RIL market has proven its resiliency. Despite substantial challenges, the market performed well in our view, with RIL delinquency rates staying below those of comparable residential and mortgage assets (non-QM and RPLs in particular) and origination volumes returning to pre-pandemic levels. And while yields in many asset classes have tightened post-COVID-19, rates in the RIL market are comparable to pre-pandemic levels, with yields comparatively stronger in the spread space as risk free rates have tightened. WHY RESIDENTIAL INVESTMENT LOANS? In our opinion, RILs are an attractive investment option for institutional investors today looking for diversification and yield. First, residential investment loans showed relative resiliency through COVID-19, maintaining lower delinquencies throughout the pandemic than other non-agency mortgage asset classes. Second, RILs command a premium over many other fixed income and real estate debt investments. Indirect exposure, through CMBS / RMBS / SFR ABS, may no longer yield the same returns it once did. Third, RILs could offer significant structural mitigated risks. The shorter maturities of bridge loans mean principal is repaid to the lender quickly, providing protection against significant market shifts. LTVs/LTCs provide significant cushion against substantial market declines, which have historically taken several years. For example, the peak-to-trough decline during the Global Financial Crisis took more than five and a half years, with house prices peaking in July 2006 and troughing in February 2012, with the largest single year drop of 12.7%.  Finally, RILs are secured by one of the largest and most liquid real estate assets in the world. As of December 2020, the US housing market consists of ~140 million units, of which ~80% are single family homes. As of June 2021, single family homes in the US are on market only six days (on average) prior to purchase. While this is due in part to COVID-19-induced tailwinds, the existing housing shortage in the US (a deficit estimated by Fannie Mae to be ~5.5 million and growing) is expected to sustain it. As investors grapple with how to navigate the post-pandemic investment landscape, we believe that the RIL market has demonstrated its worth and provides institutional investors the opportunity to invest in high-quality, highly resilient assets, with attractive risk-adjusted returns that are collateralized by one of the largest and most liquid real estate assets in the world. Any opinions, assumptions, assessments, statements or the like (collectively, “Statements”) which are forward-looking, with regards to the market or the portfolio (including portfolio characteristics and limits), constitute only subjective views, beliefs, outlooks, estimations or intentions of (The Manager), and are subject to change due to a variety of factors, including fluctuating market conditions and economic factors. Statements expressed herein may

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