Competitive Strengths
Certain underlying fundamentals have been essential to our on-going success in the mortgage acquisition and origination business. These elements distinguish us from other long-term holders of mortgage assets such as Fannie Mae, Freddie Mac, banks, thrifts, and other mortgage REITs, and provide us with significant competitive advantages.
- High Quality Portfolio. Our mortgage portfolio is comprised of loans collateralized
by conservatively appraised real estate with a minimum loan-to-value of 75%, and diversified by:
- Location - over 25 counties in California, Arizona, Oregon and Washington
- Rates - approximately two-thirds are fixed and one-third adjustable
- Property Type - Owner occupied, Non-owner occupied, Single Family and mixed Multiunit
- Small and Selective. In 2007, we will fund approximately $100 million of bridge and non-prime real estate loans. This is a comparatively small amount of funding which enables us to be very selective in choosing the best borrower situations that will offer the highest returns to our investors with the lowest risk.
- Effective Local Appraisers. All of our appraisers have expert knowledge of real estate values in their respective locations, and most of them have been working with us for nearly ten years. They know we expect conservative estimates which is critical to obtaining a correct loan-to-value measure that helps safeguard the investment.
- Strong Equity Buffer. We mandate a loan-to-value of 75%, which means that each loan is collateralized by property (or properties) with 25% or more equity. Equity and employment are the two most significant determinants of solvency.
- Matched Funding Strategy. Interest rate changes affect our cost of funds as well as mortgage loan prepayment activity. To counter the effect of interest rate changes on our borrowing costs, we closely match the maturities of our borrowings with the repricing of our assets. We also acquire and originate hybrid ARM assets, which have an initial fixed rate period, in order to reduce our exposure to prepayments.
- Loan Origination Channels. We offer our loan products through mortgage specialists. Generally, originated loans provide higher yields relative to other channels and can be obtained at a lower cost. About 70% of our portfolio acquisitions to come from originations which will enhance earnings stability and growth over time.
- Significant Operating Efficiencies. We do not have an on-going high fixed cost infrastructure. We originate loans through financial intermediaries, over the internet or by telephone. We also outsource some of our back office and servicing functions to impeccable, third-party vendors. See the companies who partner with us here.
