b'Top 5 Dangers for Mortgage Funds During an Economic CrisisbyKevin S. Kim, Esq.Geraci LLPC OVID-19 has turned the mortgage2.Insufficient Data & ReportingSome examples of key performance data world upside down.The privateare: weighted average LTV, interest rate, lending market is no different.WithFund managers need to see where they aredefault rate, foreclosures, geographical Wall Street falling over itself, the privatecurrently and where they are headed to makeconcentration of loans, property type lending market has become an industryinformed, defensible positions.If you do notconcentration, total loan volume, total assets fraught with uncertainty.This has led tohave the means to easily extract accurateunder management, and average loan term. contraction in the private lending marketdata on the funds portfolio, its like driving and put additional stresses on mortgagein a snowstorm with a blindfold on.Most fund administration and loan servicing funds.The exit of Wall Street has createdsoftware and third-party providers provide opportunity for these mortgage funds, butThese performance indicators will allow thethese data points.Its a question of whether the economic crisis has waged havoc on theirfund manager to provide accurate reportingthey are easily accessible, accurate, and investor base.This article will address fiveto investors, forecast and project futureconsistently available to the fund manager. key pitfalls funds and fund managers faceperformance, and make key decisions to in navigating an economic crisis like this oneprotect investors and the fund manager.3. Failure to Communicate and suggest solutions to avoid them.Accurate reporting also instills investorwith Investors confidence through transparency.It also 1. Succumbing to Panic provides additional evidence that the fundOne of the biggest reasons investors in manager is executing its fiduciary duty.funds get angry, seek counsel, and contact With every economic downturn comessecurities regulators is because the fund opportunity.With the secondary marketPerformance data will also allow the fundmanager is not communicating clearly or drying up, direct lenders with discretionarymanager to take certain assumptions andfrequently.The fund manager may have all capital can seize on the residual loanapply them to the data in order to preparethe data, resources, and legal discretion at originationthatnormallywenttofor worst case scenarios and understand theits disposal, but without a clear, transparent correspondents and conduit programs.true financial impact on the fund.This willand consistent communications policy, It takes proactivity, vision, and strategicallow the fund manager to make informedinvestors will lose confidence and seek to execution to succeed in times like this.It alsodecisions based on data as opposed toenforce their rights.Not only should a fund takes a strong will to avoid succumbing to thedecisions based on investor sentiment ormanager be reporting, but ensuring you media-induced panic.While you may havecircumstantial data.For example, manyare communicating regularly in writing, via to make some unpopular or painful decisionsfund managers are contemplating or alreadytelephone calls, and even webinars. on behalf of your investors, presenting ahave suspended redemptions from the fund. confident plan to succeed and executingThis is oftentimes within their rights.But itWe have seen too many fund managers on that plan is going to instill investor andisnt a decision that should be made simplyoperate in full compliance with the law, but employee confidence.We strongly advisebecause investors requests for redemptionmade the unfortunate decision to make fund managers consult with counsel, CPAs,are increasing.Without sufficient data toblanket announcements via cold e-mails servicers and their executive teams to createsupport the decision and counter investors a plan of action during crises like this.emotional responses, it is a recipe for disaster.continued on page 10Points of InterestSummer 2020Page 9'