What does Groundfloor do to protect your investment?
Last Updated: Jul 17, 2019 11:50AM EDT
GROUNDFLOOR’s Asset Management team works tirelessly to ensure that all of our loans are performing and progressing as expected. Here are a few ways in which we do this:
Our Asset Management team works with the borrowers to obtain monthly status updates of the project. This allows for communication between our staff and the borrower to have a clear understanding of the project status during the term of the loan, and minimizes any potential last-minute surprises.
Project Progress Monitoring
Prior to closing the loan, GROUNDFLOOR agrees to a schedule for completion of the renovation works and listing of the project for sale. The time between each draw is tracked. In the event a draw is not made within 30 days, GROUNDFLOOR will send an independent inspector to the property to check on the status of the works. Ensuring inspections are completed helps to reduce the risk of the project being completed and sold/refinanced on or before the maturity date.
Anytime a borrower makes a draw request, they are required to obtain a new independent inspection of work completed and provide project updates. The updates are then communicated to our investors. Please note that we will proactively contact the borrower if we have not received a status update within 30 days.
Upcoming Maturity Monitoring
As the loan gets closer to the maturity date, our Asset Management team works with borrowers to ensure timely project completion and payoff. If there is a situation where the borrower will not be able to repay the loan on time, we will first attempt to negotiate a plan to complete and sell the property to avoid foreclosure. However, in the event a borrower is non-responsive or an agreement cannot be reached, GROUNDFLOOR will initiate the legal foreclosure process if the loan is not repaid by the maturity date.
A defaulted loan is not necessarily a bad thing for our investors. Our investors continue to earn interest from the time the initial investment is made until the time that the loan is paid in full. There are some instances where default interest is added to the loan, which is then returned to our investors. Please note, this is on a case-by-case basis and will depend on the commercial agreement between GROUNDFLOOR and the borrower.
It is very important that GROUNDFLOOR reaches a resolution that provides for the maximum recovery of loan proceeds in the most time efficient manner. Foreclosure is always our last resort as it can be a very long and costly process.
For more information about how we manage risk with our loan offerings, please see our blog post detailing our Asset Management procedures. For a real-life example of GROUNDFLOOR’s Asset Management processes in action, please refer to our blog post on the subject.
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