December 2022 Performance Report

Since day one, we've been dedicated to industry-leading transparency into our business processes and performance. Take a look at the below updates for some new insights into our book of business, as well as what we're seeing from a macroeconomic standpoint, and how we're changing our business to reflect that. 

Additionally, we have started showing you both the total count of delinquent loans, as well as what that translates into in terms of total dollars. This is to remain transparent on our business performance, but also to better align with the Mortgage Bankers Association's (MBA) standard, published in its National Delinquency Survey (NDS), which is based on loan count. Additionally, the NDS states:

The delinquency rates and foreclosure starts rate are seasonally adjusted to account for trends in the data that are caused by the time of the year. For example, delinquencies tend to increase from the first to fourth quarters, peaking in the fourth quarter, before falling in the first quarter of the next year and beginning the cycle again."

The data we share in our Performance Reports is not seasonally adjusted, but we feel it's pertinent to explain seasonal trends when applicable.

December's Performance

In December, we originated 100 loans, totaling more than $34.1 million in origination volume. 

Additionally, as of January 1, 7.31% of our total loan count was 30 days or more late on payments.

What's Affecting the Numbers

The economic volatility affecting the real estate market is not only happening in the U.S. but globally. The performance of the stock market, labor market, and consumer price index all reflect the headlines about the national and global economy. Because of that, we're continuing to see the overall real estate market cool down from the record-breaking rates, list prices, and sale prices seen earlier in 2022, as well as 2021. And while we're all realizing that the market is shifting to a more "normal" state (similar to pre-pandemic), that doesn't mean there aren't concerns with rate, supply, and demand. Check out our blog post on the housing market's return to "normal."

Other things affecting the performance of our book include:

• Changing availability and/or terms of capital for refinancing or end-buyer financing impacts exit timelines and monthly payments.
• Real estate seasonality. The same factors causing residential real estate to slow during the holidays and winter months also affect our business.
• Several high-dollar loans remain delinquent on payments (with priority on exit and repayment).
• Continued supply chain issues and labor shortages contribute to construction delays and eventually, delinquencies.

What We're Doing

As always, we're actively working with our borrowers to keep their projects moving forward, on track, and current on payments. We have recently restructured the lending side of our business in order to ensure portfolio performance is our top priority.

• Self-service tools to make it easier for borrowers to request draws, payoffs, and more.
• Our Account Management and Sales teams work closely with each other and borrowers to ensure payments and projects are current before proceeding with new loans for the same client.
• Additionally, the Account Management team works diligently to ensure as few loans as possible remain delinquent longer than 30 days. 
• Updated, more efficient processes to review delinquent accounts and issue notice of default communications sooner. 

Learn more about how we handle loans that are 30+ days late in an episode of Investor Insights here.

We believe it's best to support our borrowers to exit their loans as successfully as possible — even if delinquent or in the foreclosure process — in order to preserve principal and speed to liquidity.

We're also continuing to build a strong forward pipeline even in a somewhat uncertain real estate market, remaining selective on markets to enter and what projects we fund by putting an even stronger focus on appraisals and historic performance. The Fund That Flip operational and business strategy is designed around utilizing a diverse capital stack so we're always positioned to weather market volatility and come out ahead.

If you have any questions or would like to provide feedback, email us at investorrelations@fundthatflip.com. We will respond as soon as possible.

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