JOYCE WALKER
MORTGAGE FUND UPDATE
BY T. ROBERT FINLAY, ESQ. OF WRIGHT, FINLAY & ZAK, LLP
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MESSAGE FROM BROCK VANDENBERG
Q&A WITH CURRENT INVESTOR TEAM MEMBER SPOTLIGHT
UNDERSTANDING THE SECURITY OF A PRIVATE MORTGAGE FUND
QUARTERLY RETURNS
RECENT SUCCESS STORY
MEET CRAIG AND MICHELLE HOTHEM: FROM FAMILY ROOTS TO REAL ESTATE SUCCESS IN SAN DIEGO
OUR EVENTS AND ANNOUNCEMENTS
LITIGATION TRENDS IN THE PRIVATE MONEY SPACE
As we enter the third quarter of 2024, I can’t help but think of the consensus many financial analysts had about the housing market when the Fed started raising rates in early 2022. Many felt that the housing market would collapse as mortgage payments would be far out of reach for homeowners In fact that was the case; home prices nationally in June finished at record highs
Now, I am not saying that I have a crystal ball and know where home prices are definitively going tomorrow, a month, or even a year from now But what I do know is that California continues to suffer from a housing shortage, and everything our local and state governments are doing to correct the problem is not solving the underlying issue; the lack of supply And for that reason, I am confident that home values in many urban California markets are generally insulated from larger macro-economic trends
I anticipate the second half of the year to be much like the first. Our clients will continue to look for investment opportunities and they will need financing to fund those opportunities The competition to fund the loans will remain high, with many lenders taking outsized risk to build market share. But we will remain consistent with the same underwriting guidelines that have allowed us to maintain a healthy portfolio over the last 15 years
I also want to thank you for confidence in our team and look forward to serving our investors over the long term
BROCK VANDENBERG, PRESIDENT
TALIMAR INCOME FUND
My career has spanned several decades in the media industry. For 30 years, I worked as a broadcast producer, a role that involved overseeing the production of television and radio commercials. After that, I spent 7 years producing a popular radio show in Los Angeles, a challenging yet rewarding job where I was honored to have access to top best-selling authors and leaders in the personal development field. Currently, I am a freelance copy editor, where I get to utilize my extensive experience to help authors refine their manuscripts for clarity, accuracy, and impact.
INVESTOR INSIGHTS
I have a variety of hobbies and interests that keep me active and engaged. Hiking is a favorite pastime, and I love exploring the numerous trails around San Diego and beyond. Traveling is another passion; I relish the opportunity to experience new cultures and places. Reading is a constant source of joy and knowledge and provides a quiet escape from the noise of daily life Additionally, I enjoy singing, which allows me to use my voice to express myself creatively.
I recently returned from a memorable trip to Minnesota, where I attended a close friend's wedding. It was a lovely event, and it was wonderful to reconnect with old friends. Beyond the wedding, I had the chance to visit Itasca State Park, which features the headwaters of the Mississippi River. I remember going there as a child and being thrilled to be able to literally walk across the river on stepping stones, so it was fun to revisit it and walk across it again.
My investment goals have remained consistent throughout my life. From the beginning, my primary objective has been to achieve financial freedom to ensure a comfortable retirement. This focus has driven my investment decisions, guiding me toward opportunities that offer stability and growth and helping me build a secure financial future.
I currently reside in San Diego, a beautiful coastal city known for its beaches, parks, and perfect weather. San Diego's vibrant downtown, historic Gaslamp Quarter, and diverse neighborhoods make it such a great place to live. I enjoy the blend of urban and outdoor lifestyles, which offers a perfect balance for my activities and interests
My experience with TaliMar Financial has been outstanding. I started 12 years ago when it was just basically Brock, and we were investing mainly in fix-and-flip loans. I would call Brock, and he would recommend the loans he felt were best for me. I was so happy with the returns I was getting that over the years, I just kept investing more and more. I even pulled money out of my brokerage account and moved it into trust deeds Now I have my funds split between the Talimar Income Fund and individual trust deeds. I couldn’t be happier with my decision to go this route, and I’m thankful that I found TaliMar Financial!
SUSAN JONES
Susan Jones, a SoCal native, joined us in January 2024 and manages our Investor Relations department She has been involved in investor communication and processing since graduating from California State University, Long Beach with a B.S. in International Business.
Susan is responsible for managing all aspects of investor communications and support, guiding our expanding client base through seamless onboarding and serving as their dedicated point of contact throughout their journey with TaliMar. She also contributes to new capital development, leveraging her comprehensive knowledge of our Fund and strengthening existing investor relationships.
Outside of work, Susan enjoys spending time at the beach, reading, trying new recipes, and traveling with her friends and family. .
Asset-Backed Loans: The Foundation of Security
At the core of a private mortgage fund are the loans secured on tangible real estate The real estate is what, at the end of the day, ensures the Lender receives its full repayment.
But the security of the real estate is not in itself what makes the fund a secure investment The loans need to be made to qualified investors who demonstrate the ability to make the payments.
Additionally, the loans need to be secured by borrower equity in the real estate to ensure they have a financial incentive to make the payments or, at the very least, provide enough funds to repay the loan in the event of a sale.
In today’s complex financial landscape, investors continually seek secure and high-yield investment opportunities Among these, private mortgage funds have emerged as a compelling option, particularly for those looking to diversify their portfolios with real estate-backed investments. TaliMar Financial, a leader in this sector, exemplifies the rigorous standards and practices that ensure the security of such funds. But what exactly makes a private mortgage fund secure? Let’s delve into the various elements that contribute to the stability and security of these investments
And lastly, the loans need to be secured on real estate that can maintain value through times of economic volatility It is often single family and multifamily properties that suffer the least during economic uncertainty
A key strategy in securing a private mortgage fund is diversification This includes diversification across various types of properties, geographical locations, and borrower profiles. By spreading investments across different asset classes and regions, the fund minimizes the impact of localized market downturns or property-specific issues
Diverse borrower profiles also play a crucial role By lending to a mix of experienced real estate developers, individual home flippers, and commercial property investors, the fund avoids overexposure to any single borrower category This borrower diversification helps stabilize the fund’s performance and reduces default risk
Legal frameworks and structural safeguards are essential to protect investor interests. Properly drafted legal agreements delineate the terms and conditions of the investment, ensuring clarity and protection for all parties involved Transparency is also paramount, with regular reporting and communication keeping investors informed about the fund’s performance and any potential issues.
Additionally, the alignment of interests between fund managers and investors is crucial. When fund managers invest their own capital alongside investors, it creates a mutual commitment to the fund’s success and security
The real estate market and broader economic conditions inevitably impact the security of a mortgage fund. Factors such as property market trends, interest rate fluctuations, and economic cycles can influence loan performance. A secure mortgage fund continuously monitors these external factors and adapts its strategies accordingly
By maintaining a pulse on market conditions, fund managers can make informed decisions, such as adjusting LTV ratios, diversifying loan types, or temporarily halting new loans in overheated markets This proactive approach helps safeguard the fund against adverse economic shifts.
Effective risk management involves more than just initial due diligence It encompasses ongoing monitoring of loan performance, market conditions, and borrower status.
Adherence to local and federal regulations is a nonnegotiable aspect of a secure mortgage fund. Compliance with legal standards ensures that the fund operates transparently and ethically, avoiding legal pitfalls that could jeopardize investor capital
Regular audits and regulatory reviews are conducted to ensure ongoing compliance, providing an additional layer of security for investors
Maintaining reserve funds for contingencies, such as unexpected property repairs or borrower defaults, is a prudent practice that enhances fund security.
Insurance also plays a critical role Properties within the fund’s portfolio are typically insured against unforeseen events, such as natural disasters or property damage, further safeguarding the investment
The security of a private mortgage fund is built on a foundation of asset-backed loans, rigorous underwriting standards, and strategic diversification Legal protections, regulatory compliance, and proactive risk management practices further enhance this security. For investors, understanding these elements is key to appreciating the stability and potential of private mortgage funds as a robust investment vehicle
At TaliMar Financial, we are committed to maintaining the highest standards of security and transparency, ensuring that our investors can confidently participate in the lucrative world of real estate-backed lending
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CRAIG AND MICHELLE HOTHEM
How did you get started in the industry?
My Dad started out as a small mom and pop landlord in NY and NJ, and grew it into a good size portfolio.Growing up, I started out holding the flashlight, then moved on to painting his apartments between tenants, then on to swapping out water heaters and boilers, and on and on from there During the ’09 recession, I got my real estate license to help us save on the commissions we were paying on leasing up his rentals There are commissions in rentals in North Jersey. That’s where I learned the sales and marketing side of the business Since then, it’s been thousands of hours learning the investor side of the business through podcasts and real estate coaches. Real estate from construction, to sales to investing is all I’ve ever done.
What types of real estate projects do you target and why (property type, # of units, etc.)?
My focus is primarily buy and hold, heavy value-add, multifamily, 5-20 unit properties. I learned from my Dad, that real estate is long game Having gone through a few cycles in a few different markets, I saw pure flippers get wiped out when markets shifted. The buy and hold investors would better weather storms, and the longer you hold, the better their portfolios perform. I like to buy in my own backyard of San Diego, so in order to find assets that pencil, they typically need to be in rougher shape. Then I can force appreciation through renovations I like 5+ units so that I can better anticipate the post renovation values through NOIs. I have better control of the net income, than I do sales comps, which buyers and appraisers use to value single family homes up to quads.
What are the top three things that you consider when buying a new project?
Location, future tenant base and room to grow Most of my projects have 2 or 3 phases
First I buy, renovate, lease up and then refinance to stabilize the income and debt. Then once it’s up and running, I can take time on getting permits to add more units and scale up the profitability
What do you enjoy most about investing in real estate?
The simplicity and scalability of it. It’s a sector that definitely satisfies the “ very simple, just not easy ” philosophy. The math is pretty basic (rents, mortgages, expenses) and the renovation process comes naturally to me. As to the scalability, especially with the rentals, after the renovations and lease up, they don’t require that much time out of my week. Then it’s just a rent and growth machine that is running in the background while I work on the next one Real estate investing also has a wonderful community side of it. Once I had a few deals going, I’ve found there are tons of bigger operators than me, that are very generous with their time and experience, willing to help me find answers to questions that come up. For the most part, everyone is genuinely happy to see each other succeed Its a really great “team sport”.
What do you enjoy outside of real estate?
Spending time with my amazing wife, Michelle and our 5 year old son, Clark and 4 year old daughter, Claire Michelle is a top-tier realtor in La Jolla, so even our casual time, inevitably will include stopping to check out a property with the kids on the way to the Zoo or beach. I also like volunteering with my Rotary club’s various service projects. Then there’s also have a woodworking hobby that has taken over our garage A couple years ago I built our white oak, trestle, dining table and bench. Over the years, it now has a fair share of ring stains and sharpies and gouges from the kids, so we ’ re about ready for a new one
Can you provide a brief explanation of your current project (purchase amount, construction cost, exit strategy, why you liked this project)?
1929 Missouri Street is one of the rare flips that I do This was a single family home that we bought on the open market. We bought it for $880,000, renovated it for about $170,000 and are under contract with a buyer right now for $1,200,000 The renovation took 9 weeks and was a pretty heavy lift, including raising the ceiling and roof, full re-wire and re-pipe, including new sewer lines, and adding HVAC, etc We bought this project because it was 1 block away from my house, so very easy to manage and located in a market we know very well I expected we could turn it around pretty quickly and even at the $1.2 million asking price, it is the most affordable, detached home in its entire zip code, by $300,000 It’d work well as a “starter” home in the area, and also work great as a second home or AirBnB for an end-buyer as it’s only 1 2 miles from the Pacific ocean
I’m still bull-ish. We’re currently in escrow on a 6-unit project right now and have permits submitted on 3 other sites, to add units where I have existing rentals My Dad taught me not to be afraid of high interest rates. The properties still have to make sense of course, but he always said, “Once you find a property you really like, buy it. You can always change the money (interest rates) or condition later You can’t change, not getting the property that you really wanted ”
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We are thrilled to announce that Brock VandenBerg, President of TaliMar Financial, was elected to the Board of Directors of the California Mortgage Association ("CMA").
The CMA is an association dedicated to providing ongoing education for California based private money lenders and the advocacy of the industry. Brock has been involved with the CMA for over 5 years and is excited to continue the efforts of the CMA into the future.
Brock is looking forward to making a positive impact on the CMA and the broader private lending community.
In loving memory of October 20, 1929 – June 25, 2024
It is with great sadness that I share the passing of Anthony Peter Morreale on June 25. Anthony was a long term investor and a dedicated supporter of our fund. His unwavering belief in our mission and his invaluable contributions played a crucial role in our success
Anthony's dedication, integrity, and friendship will be profoundly missed. Our thoughts and prayers are with his family during this difficult time We are committed to honoring his legacy by continuing to uphold the values he cherished.
Sincerely, Brock VandenBerg, President TaliMar Financial
With access to conventional loan sources tight these days, many private money lenders are having their best months or years ever. Of course, with making more loans comes increased risk. This article will explore the types of litigation that are keeping private money lenders up at night and how to minimize their risk.
by T Robert Finlay, Esq of Wright, Finlay & Zak, LLP
hen someone thinks of elder abuse in the lending context, its usually in the context of a bad lender making a loan to an elderly borrower who lacks capacity to know what they are even agreeing to . Most lenders and, in particular, CMA members, do a great job of weeding out those potential borrowers However, in the current lending landscape, “elder abuse” means something totally different, much harder to identify and far more dangerous.
Our firm is currently seeing a wave of a different kind of elder abuse litigation Instead of claims limited to capacity issues, the current trend involves business purpose loans to anyone over the age of 65, where the loan was allegedly for a “wrongful use ” . More specifically, the lawsuits allege that California’s Welfare & Institutions Code § 15610 30 defines “financial abuse” as when a lender (in our context) “takes” or “retains” real property of an elder (anyone over 65) for a “wrongful use ” , which is further defined as when the lender knew or should have known that taking or retaining the real property is likely to harm the elder As you can imagine, it would be very easy for a crafty attorney to argue that the high fees and interest on private money loans was not in the elder’s best interest and therefore, harmed the elder.
In one recent case (not handled by our firm), the elder was awarded damages in excess of $600,000 AND had two loans voided without any obligation to repay the funds the borrower received! In addition, the case is headed to a second phase to determine whether punitive and treble (trible) damages are warranted.While the allegations in that case appear particularly egregious, borrowers’ attorneys argue that the same concept applies anytime the over-65 borrower is harmed by the terms of the loan.(See Brown v. Abayachi, et.al., Alameda Superior Court Case # RG20079500.)[1]
Practice Pointer – While lenders cannot simply refuse to lend to anyone over 65, they can look at those loans more closely before approving or buying the loan In addition, keep an eye out for a pre-lawsuit demand At least one attorney, Sil Vossler, generally sends a demand before filing suit. If you receive a letter from him, we recommend immediately involving counsel to discuss your response options
Note – this issue only applies to California loans where the interest rate is over 10% and the usury exemption used at origination involved a licensed real estate broker.
California loans secured by real property that contain an interest rate over 10% are considered usurious unless one of the many exemptions apply. One of the most common exemptions is when the loan is negotiated or arranged by a licensed real estate broker In that event, the interest rate can exceed 10% In 2023, the Bankruptcy Appellate Panel out of the 9th Circuit (“BAP”) dealt lenders using the “broker exemption” a blow when it held that, in order to maintain the broker exemption following a forbearance, the forbearance itself must be negotiated and arranged by the licensed broker who originated the loan itself AND that loan was in connection with a sale, lease or other transaction (e.g., a purchase money loan). As a result, the BAP’s decision in In Re Moon arguably restricts the use of the broker usury exemption to any forbearances! This leaves lenders with few options – (1) if it was a purchase money loan, use the original broker to negotiate the forbearance; (2) refuse to do a forbearance, i.e., foreclose; (3) lower the interest rate to below 10% as part of the forbearance; or (4) risk exposure for not following the BAP’s opinion.
The lender in the Moon case appealed the matter to the 9th Circuit. Industry groups rallied behind the lender (who was just trying to help the borrower avoid foreclosure). To that end, our office filed an amicus brief on behalf of the CMA and NPLA Unfortunately, the 9th Circuit affirmed the BAP ruling (in an unpublished decision), agreeing with its holdings that: (1) the settlement agreement was a forbearance for purposes of the usury laws, (2) it was not subject to an exception under 1916.1 (as this was not a credit sale and no broker was involved in the forbearance), (3) it did not matter that the interest rate was lowered since it was still above 10%, and (4) the lender was nonetheless entitled to post-judgment interest on the principal.
Although the 9th Circuit’s decision is unpublished and, therefore, not citable in court, the BAP and underlying bankruptcy court decision are still citable More importantly, the “bell has been rung ” on this issue and, as a result, we are seeing lots of litigation from borrowers arguing that any type of forbearance on a loan with an interest rate over 10% is usurious.
Practice Tip: Consult with counsel before entering into any type of forbearance, modification or extension where the interest rate is over 10%
This is a very popular lawsuit these days.The common scenario usually looks something like this: a private money lender makes (or investor buys) a non-owner occupied loan with a signed certification that the loan was for a legitimate business purpose After the loan matures or the borrowers’ otherewise default, they file suit claiming that their business purpose loan was actually a consumer loan. Naturally, the lender points to the borrowers’ representations in the loan documents. In response the borrowers claim that their “broker made them do it” and that everyone knew all along that this was a consumer loan.
While the borrowers’ business purpose statement is helpful, it unfortunately does not end the discussion. Courts often look at a variety of factors to determine whether the loan was, in fact, for a legitimate business purpose If it was not, the lender may have violated a series of state and federal laws that apply to the origination and servicing of consumer loans Of course, it hardly seems fair that the lender would be liable for relying on borrowers’ representations. For this reason, we often file crosscomplaints against the borrowers for loan origination fraud
Practice Tip: Be sure to document the business purpose and remember that, while borrowers are your friends at loan origination when they need the money, they quickly turn on lenders when they go into default.
In addition to defensive litigation, we are also seeing an increase in lender-initiated actions. Specifically, with some LLCs walking away from unprofitable projects, we are seeing an uptick in demands and lawsuits to enforce personal guarantees Often, enforcing the guaranty is enough to reengage the borrower and get the loan paid off
Likewise, we are having more frequent discussions with lenders about appointing a receiver to collect rents Most private money loans have Assignment of Rents language, allowing them to put a receiver in place to collect rents.Whether moving to appoint a receiver makes sense is generally an economic decision; but, when it makes sense, the ability to start collecting rents is a great way for lenders to offset their losses while the loan is in default.
We are also seeing a significant increase in fraud-related matters on several fronts, including appraisal, broker and borrower fraud. We are not sure if there has been an actual increase in fraud or whether the fraud is just being exposed more as a result of an increase in defaults Either way, fraud claims are definitely on the upswing
Lastly, title claims! While title claims are a regular part of private money lending, we have definitely seen an increase in claims and (questionable) denials.If you believe the title company wrongfully denied your claim, we recommend immediately consulting counsel.In addition, if the title company accepts your claim, it is usually prudent to have counsel oversee title appointed counsel to make sure they are protecting you.
There are lots of ways for lenders to get sued, especially in California These are just a few of the current trends we are seeing. If you are seeing other types of litigation, please let us know as we are always curious to find out what the new theories are being bounced around the courts In addition, if you end up losing a case that could impact the private lending space, please reach out to our office to see if our Certified Appellate Specialist believes the case is ripe for an appeal and/or whether the CMA and other industry groups are interested in filing a potential amicus brief in support of your appeal
If you have any questions on this issue, please feel free to contact Robert Finlay at rfinlay@wrightlegal.net.
Disclaimer: The above information is intended for information purposes alone and is not intended as legal advice. Please consult with counsel before taking any steps in reliance on any of the information contained herein
TaliMar Income Fund I is a mortgage fund focused on funding residential and commercial private money loans. Since 2008, our experienced management team has successfully funded 850+ loans totaling $450+ million Our mission is to provide investors a transparent investment platform to earn consistently monthly income.
If you have any questions, please do not hesitate to contact our Investor Relations team at (858) 242-4900.
888.868.8467 toll-free
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Disclosure: This advertisement is for informational purposes only and does not constitute an offer to sell nor a solicitation of an offer to buy any security Such offers can only be made by the Private Placement Memorandum (“PPM”) and related subscription documents Any investment in TaliMar Income Fund I involves significant risk You should not enter into any transactions unless you fully understand all such risks and have independently determined that such transactions are appropriate for you Business Purpose Loans arranged through TaliMar Income Fund I, LLC (DFPI CFL License No 60DBO-137778)
