Finance, Loan, Debt and Credit.

February 16, 2018

Mortgage Pools – Jump In, the Water’s Fine

Filed under: Mortgage — Tags: , , , , , , — admin @ 12:46 am

I often get questions from potential investors about the basic functions of a mortgage fund (aka a mortgage pool). Therefore, I’ve decided to write about mortgage pools in general to clear up any misconceptions.

Mortgage pools are securities that are required by state and federal agencies to provide complete and full disclosure through an offering memorandum. A mortgage pool is a collection of capital contributions from many investors and is usually in the form of a limited liability company that sells shares. The investment pool of capital is then used to purchase a number of different loans, which are commonly called mortgages or trust deeds, and secured by real estate.

There are basically three ways to invest in mortgages, and regardless of a person’s real estate or investment acumen, there is a mortgage investment option available today that fits their investment portfolio. The three ways are: funding a mortgage directly, participating in a multi-lender or syndicated specific mortgage, or by investing in a mortgage pool.

The purpose of a mortgage pool is to create a long-term investment vehicle that provides for the fund’s management and a favorable rate of return to investors, while providing them with a diversification of risk and stability. Also, mortgage pools are redeemable on relatively short notice so they offer more liquidity than a direct mortgage or syndication.

For investors who don’t have the real estate expertise and don’t want to commit the time and energy to learn, the best route is to find a company that offers mortgage pools, like The Grace Fund LLC. These companies employ the services of a manager and administrator of the mortgage pool on the investor’s behalf who furnishes the investor with a monthly statement to keep them informed of their account balance, current yield and other details. The mortgage fund manager is paid a modest fee to research the proposal, make the lending decisions and handle all of the payments and administration. Fees earned by the manager are not paid by the investor, but rather a percentage of the income earned on the mortgages and servicing fees charged to the borrower.

These mortgage pools work through a four-step process: 1) investors purchase shares of a company; 2) the company purchases a number of qualified trust deed investments or mortgages; 3) the trust deeds and mortgages provide a return to the company and; 4) the company distributes a return to the investors from monthly cash flow, or growth through a Distribution Reinvestment Plan instead of taking a monthly payment.

Investing in the mortgage market can be a solid option for investors who want to benefit from the commercial real estate market without actually buying real property. In the past couple of years, returns of 10% to 12% or more in mortgage pools – compared to 3-4% for more mainstream investments – have been common. The pool is continuously managed with a primary objective of securing new mortgages to replace mortgages that mature, thus insuring investors a steady stream of passive income.

Monthly income from most mortgage pools usually varies as interest rates change or when mortgages are paid off. The returns to investors from the mortgage pool would follow market interest rate increases or decreases. The investor in a mortgage pool earns a blended rate of return on investment based on the interest earned from each respective mortgage. However, in the case of an investment in The Grace Fund, monthly distributions of 1.25% (15% annualized) are made to investors. To achieve the higher return, the Grace Fund mortgages are fixed at 15.5% annual interest to the borrower, an affiliate of Grace Realty Group. The higher rate reflects a premium to distinguish The Grace Fund from the many competitors vying for investor dollars in the marketplace.

I believe the most convenient, effortless and safest method for the average investor to invest in a debt instrument is through a mortgage pool. They pool their money by buying shares in the fund, and the interest earned from the mortgage payments received from the borrowers becomes income for the fund. All income earned is distributed to shareholders according to their proportional interest. Simple.

Similar to a mutual fund, a mortgage pool provides a vehicle to diversify a portfolio of investments – in this case, mortgages instead of stocks or bonds. Investing $50,000 in a mortgage pool consisting of 25 loans valued at $15 million provides better security through diversification than a $50,000 investment in a single loan secured by a single property.

Unlike a mutual fund, mortgage funds are secured by real estate and not subject to the same volatility as the stock market. Most mortgage pools are backed by well-underwritten and well-secured real estate loans. This is particularly true when the mortgages are secured by property that is financed at a very low loan-to-value ratio. To further mitigate risk, additional security is realized when the borrower purchases properties at a price far below their replacement cost with considerable value-added possibilities (buy low, fix up and sell strategy).

Another advantage to mortgage pools is that they are very suitable for most tax-deferred savings accounts including IRAs and 401ks, making them a good fit for future retirees or anybody else on a fixed income. An investment in a mortgage pool should be considered for inclusion in every serious investor’s portfolio.

Doug Mitchell is the CEO and President of Grace Realty Group, Inc., a Florida investor in value-added commercial real estate projects located in the Southeast United States. Grace offers individual investors debt and equity positions in the projects it redevelops.

August 8, 2017

Getting a Jump Start on Your Tax Return

Filed under: Tax — Tags: , , , — admin @ 12:47 am

The New Year has begun and tax season is upon us.  Even though we are a short time away from the April 15 deadline, it will be here before you know it.  So, why not use this time to get organized and ready for your tax preparation.  Here are a few steps you can take to help you get a jump-start on your tax return.

1.  Gather all records and required forms:

First of all, prepare a detailed checklist of all receipts and statements you will need in order to prepare your tax report.
Collect all of your W2’s, 1099’s and other financial receipts and statements.
Review your year-end statements to ensure the information is accurate.  If you find errors or have concerns, contact your employer or financial institution for an explanation. Errors will need to be corrected and submitted as the IRS will use the submitted statements of income to check your return.
Find the required IRS forms online at as well as the instructions for completing the forms.  Print the forms you need to complete.
Review your IRS forms and instructions to learn about any changes for tax deductions you may be eligible to claim.
IRS services are available by phone if you need to contact them.

2.  Check and recheck your return:

Be sure to check the math on your return and each person’s social security number for accuracy.  These two areas are the most common for errors found in tax returns.

3.  File your return timely:

Keep copies of your return, as well as all documentation used to complete your tax report.
Keep all returns in a secure place for retrieving at a later time.
Tax returns should be maintained for a period of three years with a longer retention period for some documents.

4.  Electronic filing benefits:

·        Electronic filing catches most mathematical errors you may have missed.


·        Confirmation will be given at the time you submit your return recording your timely action.


·        In the event you are to receive a refund, you may request a direct deposit allowing your funds to be available to you much faster.


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