Investor Risks

What Is a Mortgage Investment — Really?

A mortgage investment involves lending capital secured by real estate, typically through:

• Individual private mortgages

• Mortgage Investment Corporations (MICs)

• Pooled mortgage funds

• Purchased mortgage notes

Returns are generated primarily through interest income and fees, not property appreciation.

While the investment is backed by real property, repayment is not guaranteed.

Default Risk: Borrowers Can and Do Miss Payments

The most fundamental risk in mortgage investing is borrower default.

Default may result from:

• Loss of income

• Rising interest rates

• Property value declines

• Poor exit planning by the borrower

• Economic or market shocks

When a borrower defaults:

• Interest payments may stop

• Enforcement begins

• Capital may be tied up for extended periods

Even well-underwritten mortgages can default.

Enforcement Takes Time — and Costs Money

When a mortgage goes into default, recovery is not immediate.

Enforcement realities include:

• Legal notices and demand letters

• Power of Sale or foreclosure proceedings

• Court delays

• Property management and sale costs

During enforcement:

• Capital is illiquid

• Legal and carrying costs reduce net returns

• Final recovery may be less than expected

Real estate security does not mean instant liquidity.

Liquidity Risk: You May Not Get Your Money Back Quickly

Mortgage investments are illiquid by nature.

Unlike public markets:

• There is no guaranteed redemption date

• Secondary markets are limited

• Early exits may require discounts or approvals

Capital may be locked in until:

• The borrower refinances

• The property sells

• Enforcement concludes

Investors should only allocate funds they do not need short-term access to.

Market Risk: Property Values Can Decline

Mortgages are secured by property — and property values are not static.

Market risk includes:

• Declining home prices

• Overvalued appraisals

• Shifts in local demand

• Longer-than-expected sale timelines

A declining market can:

• Increase loan-to-value ratios

• Reduce recovery proceeds

• Impact capital preservation

Equity buffers matter — but they are not guarantees.

Interest Rate & Reinvestment Risk

Mortgage investments are often short-term.

This creates:

• Reinvestment risk if rates fall

• Idle capital between deals

• Changing borrower demand

Conversely, rising rates can:

• Increase borrower stress

• Raise default risk

• Slow refinance exits

Yield and risk move together.

No Guaranteed Returns — Ever

Mortgage investments are not guaranteed investments.

Important realities:

• Past performance does not predict future results

• Target yields are not promises

• Capital loss is possible

• Principal is at risk

Even conservative, low-LTV mortgages can experience losses under adverse conditions.

When Mortgage Investing Makes Sense

Mortgage investing can be appropriate when:

• You understand real estate and credit risk

• You can tolerate illiquidity

• Capital preservation matters more than speed

• You are diversified

• You accept that enforcement is part of the business

It is not suitable for:

• Short-term cash needs

• Guaranteed-income expectations

• Low risk tolerance

• Investors who cannot withstand delays or volatility

Questions Every Investor Should Ask Before Investing

Before allocating capital, ask:

• What is the true loan-to-value, not just on paper?

• What happens if the borrower defaults?

• How long could my capital be tied up?

• Who controls enforcement decisions?

• What fees, expenses, or waterfalls apply?

• How are conflicts of interest managed?

If you do not fully understand the answers — pause.

Our Philosophy: Transparency Over Promises

We believe sophisticated investors deserve:

• Clear disclosure

• Conservative underwriting

• Realistic expectations

• No yield hype

Mortgage investing should be treated as risk-managed lending, not passive income.

If an investment does not align with prudent risk principles, it should not be made.

Speak to a Professional Before You Invest

Before investing in any mortgage product:

• Review all offering documents

• Understand enforcement and liquidity risks

• Consider independent legal and tax advice

• Align the investment with your broader portfolio

Strong returns mean little without capital preservation.

Your capital deserves clarity — not assumptions.

This page is for educational purposes only and does not constitute investment advice, an offering, or a solicitation. Always review official offering documents and consult qualified professionals before investing.