Since day one, we've been dedicated to industry-leading transparency into our business processes and performance. A few new things in case you've missed them:
Our accredited investors continue to invest in projects ranging from zero to 100% complete, in all of the 36 states in which we conduct business, split between new construction, rehab and bridge loans. Those investments into Horizon Fund are amplified through a conservative use of leverage that has allowed the Horizon portfolio to currently own $58.9mm in gross loan amount. Conscientiously focused on diversification, the fund ended February with just 4 of 203 mortgages late on payments. You can read more about the Horizon Fund’s performance in the Quarterly Investors Report here.
In February, we originated 162 loans, totaling more than $49 million in origination volume.
As of March 1, 13.16% of our total loan count was 31 days or more late on payments.
With the exception of an expected seasonal drop in origination for January, our monthly origination has stabilized. As we discussed last month, our underwriting continues to be calculated and conservative, which is why you can see a slight reduction in overall book size in the above chart (22 loans from January to February). This drives the appearance of a growing delinquency; however, the numerator isn’t changing. This is a small percentage of nagging loans that we are diligently working to close out.
We are proud of of our historic performance in this area of the business; we proudly boast a principal recovery rate of over 99.7% since inception
As you can see in the charts above, we show you the total count of delinquent loans. 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. However, the MBA classifies delinquency as loans that are 60+ days late on payments, while we include the count of delinquent loans from 31+ days to again, remain transparent.
The NDS states:
The data we share in our Performance Reports is not seasonally adjusted, but we feel it's pertinent to explain seasonal trends when applicable.
More Insight into Delinquencies
The management of delinquencies at Upright remains a top priority, with our Servicing and Asset Management teams employing best-in-class practices to ensure both expeditious and maximum recovery. These practices encompass relationship-based borrower management, swift Notice-of-Default issuance, and work-out evaluation by our loss mitigation team once a borrower is 60 days delinquent. Additionally, Upright is continuing to enhance our proprietary foreclosure and loss mitigation management system, to ultimately provide real-time loss mitigation and foreclosure updates to investors.
It is essential to note that the short-term nature of our asset class necessitates a nuanced understanding of delinquency rates. While performing loans are typically repaid within an average of 10 months from origination, delinquent loans often require a more extended resolution period. Subject to the county court systems, Foreclosures have seen an average national timeline approaching three years, with most of the states in which we operate averaging close to two years.
The past few tumultuous years have further complicated the situation as many borrowers entered into default as a function of optimizing when and at what price point their active projects should be brought to market. Further, many investors leverage seasonal buying trends before selling a property, before refinancing it based on newer comparable sales that support higher value (and potentially waiting for lower interest rates), or before leveraging the sale or refinance of another property to sustain payments and project development. As an asset-based lender, we strive to balance being sensitive to the challenges our developers face to help foster the completion and successful exit of their active projects while also progressing towards the ability to foreclose to recoup investor principal as quickly as possible. If you have any questions or would like to provide feedback, email us at ir@upright.us. We will respond as soon as possible.
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