What does Groundfloor do to protect your investment?
Last Updated: Nov 30, 2017 09:58AM EST
Project Updates 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.
Construction 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 provide project updates. The updates are then communicated to our investors. Please note that we will 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.
Default Interest 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.
Workout Examples We have provided a few examples below of recent loans that were extended and repaid with default interest, which was passed through to our investors.
5225 Foxhill Drive NW - The loan was repaid on October 19, 2017 with the contract interest rate of 13.4%. The default interest rate of 17.4% was assessed for 84 days that the loan was in default, which was passed through to our investors.
1431 Elizabeth Lane - The loan was repaid on October 16, 2017 with the contract interest rate of 13.4%. The default interest rate of 17.4% was assessed for 112 days that the loan was in default, which was passed through to our investors.
879 Ormewood Avenue SE - The loan was repaid on October 16, 2017 with the contract interest rate of 13.4%. The default interest rate of 17.4% was assessed for 112 days that the loan was in default, which was passed through to our investors.
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