Business Strategies from a Hard Money Business Perspective

260 Newport Center Dr. , Suite 403, Newport Beach, CA 92660 949-632-6145 www.mortgagevintage.com

Table of Contents

12 Days of Christmas & 12 Steps of Trust Deed Investing ............................................................1

Seek First to Understand...Then Be Understood .............................................................................2

Which Real Estate Investment Strategy is Best for You?................................................................3

Crowdfunding: Promise or Peril for Hard Money Lenders? ..........................................................4

Bubba’s and Business Consistency Factors ....................................................................................5

Be Quick but Don’t Hurry ..............................................................................................................6

What Have You Learned? ...............................................................................................................7

8 Ways to Stay Current ...................................................................................................................8

6 Ways to Start Learning Like a Machine .......................................................................................9

Interest Never Sleeps .....................................................................................................................10

Making Others Successful ............................................................................................................11

All Great Things are Made Simple ...............................................................................................12

Life is About Opportunity .............................................................................................................13

Better to Be an Inch Wide and a Mile Deep than a Mile Wide and an Inch Deep ........................14

Capitalizing on “The Cloud”: 5 Ways Enhance Borrowing and Lending .....................................15

Fast – Fast – Faster .......................................................................................................................16

Don’t Fight the Fed! ......................................................................................................................17

I May be Small but I can Do Big Things ......................................................................................18

Yield Olympics: Trust Deed Investments Win the Gold ..............................................................19

1

The 12 Days of Christmas and 12 Steps of Trust Deed Investing

The revelers sang “The 12 Days of Christmas” at our Holiday party the other night and our spirited late night rendition reminded me of the steps we need to take every day to get ready for Christmas Day. As my son reminds me every morning of how many days are left until Christmas, I realize the many shopping, hanging lights, sending card items I still need to accomplish. Instead of getting overwhelmed, I think about the 12 days of Christmas as a process and knock out tasks every day. If I start on the first day, I can ultimately feel prepared when Santa arrives. Just like the 12 Days of Christmas process, to get ahead, smart investors should leap into the 12 Steps of Trust Deed Investing. The problem with Trust Deed investing today, whether a lender wants a single or a portfolio of Trust Deeds is that the buying and selling process is anchored in clandestine brochureware, phone calls and inaccurate email distribution lists. The traditional yet archane Trust Deed Investing “call us to invest” process remains opaque, time consuming and inefficient. The new paradigm of Trust Deed Investing with Mortgage Vintage’s CrowdTrustDeed Marketplace embraces a simplified online 12 step process. To get the best yield and those 5 golden rings, Trust Deed Investors should capitalize on a new collaborative buying and selling Trust Deed marketplace. Like the 10 Lords a Leaping, an Investor can quickly leap through the new online realtime TrustDeed Investment process at CrowdTrustDeed. Trust Deed investors will earn more and save time, effort and risk while experiencing transparency, compliance and an enjoyable social experience.

2

Seek First to Understand….Then be Understood

I received a loan scenario recently and the request was for a large

new 1st Trust Deed that was paying off an existing Bank First Trust

Deed while providing cash-out to the borrower. When I discussed

the loan with the borrower, I asked some questions and understood

that what the borrower really wanted was cash-out money to fix the

rental property in preparation for an immediate Sale. As in many

cases, the borrower needed the money but did not understand the

intricacies of his/her loan choices. In this case, the borrower did not

want or need a new higher priced 1st Trust Deed, and had plenty of equity in the property to support a new

short term 2nd. The problem was that the borrower had not really been listened to.

Rules and Regulations for housing finance can be complicated and confusing. Lenders and Brokers forget

that borrowers may not understand seemingly rudimentary terms, loan options, compliance issues and

loan-to-value ratios. Below is a table depicting loan requirements in simple English and the applicable

Hard Money Loan Product:

Understanding the Borrowers Need Hard Money Loan

Solution I need capital for this Fix and Flip investment so I can use my capital for a down payment on 2 more flips that I have the opportunity to buy this week.

1 year Fix and Flip loan with 80% Loan to Cost

I need to pull money out of the equity in my house so I can buy a new piece of equipment for my business.

3 year Business Purpose Cash-Out Loan in either 1st or 2nd Position

I would like a loan so I can buy a Duplex for retirement income

5 year Investment purpose purchase loan

I am in Escrow to buy a new Principal Residence and have not been able to sell my current home yet. I need money to buy my new house.

11 month Bridge Loan to Purchase a new Principal Residence while current home is not yet sold

I have a Short Sale on my Credit Report and can’t qualify for a conventional loan. I make plenty of income in my own business and want to buy an amazing new Principal Residence.

5 year Small Creditor Qualified Mortgage (SCQM) Owner Occupied loan.

I put an offer in on a Short Sale residential property that I want to fix and rent and my offer was accepted. I need to close by Friday.

3 Year Fix and Rent Loan with 80% Loan to Cost (20% down payment)

The Seller carried back a loan when I purchased the small commercial property and the Seller is offering me a discount to purchase the Note at a discount. The only problem is that the Seller wants the money and we need to close by Friday.

3 Year Small Commercial Bridge Loan

3

Which Real Estate Investment Strategy Is Best for You? I recently attended the Real Estate Investor Expo “REIEXPO” in Anaheim, CA and enjoyed meeting many Real Estate Investors while learning about new Investment strategies. What struck me about the meeting was the plethora of methods Real Estate Investors use to make money in Real Estate. Investors with different education, skill sets, risk tolerances, time, money and licensing have a choice of the type of real estate investment that fits their personal profile. The investors I met work to grow their cash flow and personal wealth while maintaining an entrepreneurial and non-corporate lifestyle. Which Real Estate Investment Strategy is best for you? While there are many more real estate investment vehicles than I mention below, I have broken down some of the major investment types and commented on the advantages and success factors for each real estate investment approach:

Investment Type Advantages to Investment Success Factors PurchasingTrust Deed Investments

-Smart passive 9-11% monthly income -Equity protection -Personal choice on Loan to Value, product type, term and location

-Reliable Trust Deed sources -Redeployment of paid off capital

Hard Money Lending -Knowledge of property and borrower -Finding qualified loan scenarios

Bulk Promissory Note Investing

-Note Pool Discount opportunities -Investment diversity -Multiple exit scenarios

-Larger capital requirements for loan pools -Manage foreclosure timelines

Buying Notes on an Exchange

-Loan Origination not required -Geographic diversification -Discounts to par available

-Origination quality -Compliance checks -Minimize transaction fees

Fix and Flip Single Family Residences

-Multiple on Rehab dollars spent -Loans and equity sharing available -No licensing required

-Expeditious repairs -Expense control -Realistic After Repair Value

Investing into a Mortgage Fund

-Diversity across multiple Trust Deeds -Consistency of returns

-Management fees = lower yields -Loan type and quality monitoring

Fix and Rent Single Family Residences

-Longer term investments – 3+ years -Good tenants maintain the property

-Capital requirements -Expense and property management -Minimize vacancy, quality tenants

Buying and Holding Multi-Family

-Multiple tenants = less risk to income -Rental rate increases -Value add opportunities

-Low Cap Rates -Large capital requirements -Minimize vacancy, quality tenants -Property management

Buying office, industrial commercial properties

-Multi-tenant provides income security -Longer term tenancy available -Value add opportunities

-Product saturation limits rental increases -Cap rate compression

4

CrowdFunding: Promise or Peril for Hard Money Lenders?

When one of our lenders recently moved their investment funds to

Crowdfunding Trust Deed providers, I realized I better get up to

speed on Crowdfunding. How will this new capital raising

phenomenon impact the Hard Money Loan and Trust Deed

investment business? How can a Hard Money Lender effectively

Crowdfund? I will answer a few of these questions over my next few

Blogs but for today I will discuss whether Crowdfunding offers

Promise or Peril for Hard Money Lenders:

In October, 2013 Congress passed and the President signed the “Jobs Act” into law which authorized this

new era in fund raising. Crowdfunding is, according to Forbes, the practice of funding a project or

venture by raising many small amounts of money from a large number of people, typically via the

Internet. While Hard Money Lenders sell Trust Deed Investments over the Internet to multiple people,

there is a wide chasm between today’s traditional Hard Money Lender and the new breed of Real Estate

debt Crowdfunding companies.

To effectively evaluate the Promise of Real Estate Debt Crowdfunding, the perspectives and benefits from the Borrower and Lender stakeholders need to be understood:

Real Estate Debt

Crowdfunding Promise

Hard Money Loan Borrower Benefit Hard Money Lender

Benefit Lower Cost of Funds to Borrower

Lower cost of funds to borrower make more projects viable and increases potential profits

Lenders enjoy 9% - 12% returns today. These yields may scale back if borrowers get lower rates

Transaction Transparency Good for the borrower to divulge all of the aspects of the deal

Reduces fraud

Underwriting Transparency Helps borrowers screen potential projects Lenders love due diligence transparency and the ability to quickly determine their interest in funding a loan

Funds reliability Certainty of funding eliminates a big headache for borrowers

Everybody knows the percentage of the funds raised for the loan

Online experience Would like to know status of their loan real-time

Other lenders/friends involvement, social aspects of lending, loan/borrower/investor ratings

Lower investment entry cost to Lender

If more capital means lower rates, borrowers are all for it

More capital available to fund loans with lower entry costs to funding

Faster Funding Beneficial in distressed acquisition and cash-out situations

As long as the due diligence is complete and compliance is met, no problem

Diversification Loans for various property types Lenders desire a diversified Trust Deed Portfolio to spread their risk

5

Bubba’s and Business Consistency Factors

I watched the Masters and the most consistent guy won. Bubba Watson not only won the 2014 Masters Golf Tournament by hitting the longest drive at 366 yards on the 13th hole on Sunday but consistently out drove the field. Bubba averaged 305.63 yards off the tee and more importantly hit all but one fairway during his round on Saturday. Consistent and long with the driver, tied for fifth in greens in regulation, hitting 50 of 72 for the week, and 16th in putting. Those statistics add up to a second Green Jacket for Bubba. Consistency also wins in business. I thought about what makes Bubba consistent in all parts of his game and how those characteristics also provide keys to business success.

Bubba’s

Consistency

Factor

Comment Business

Success

Comment

Golf Clubs Bubba’s Ping Pink Driver is one of a kind.

Systems and Technology

A successful business weaves together a set of systems and technologies to outpace competition

Training and Practice

Bubba played the Nationwide Tour on his way to the big show.

Hard Work Training, working hard, learning from experts and ongoing education

Sponsors Team Ping, Travis Mathews, All Sport, Marquis Jet

Employees/ Service Providers

High performing employees and service providers define the business’ expertise and capabilities

Strategy Bubba's strategy for the 2014 Masters was a good one: hit it further than everyone, straighter than almost everyone, and as a result hit more greens than basically everyone.

Precise, concise and quantifiable business plan

Defining the niche plan for a business and having the discipline to focus on your chosen niche and value add will facilitate success. Once you have a plan, then execute, iterate, repeat.

Powerful Swing that plays to Bubba’s strengths

Bubba’s frenetic and fidgety temperament contributes to his unique and powerful swing. Even though Bubba is the Longest Driver on the PGA Tour, hitting the ball really far, it turns out, wasn't all that important in the Masters. In fact, it was probably the least important determining factor compared with Driving Accuracy and Greens in Regulation.

Leverage skills, education, talents, expertise and experience

Successful business enterprises capitalize on their strengths. In my case, I leveraged my UCLA education, IBM Financial Industry Sales, CB Commercial Brokerage Mortgage and Title Software industry and sales expertise to develop an industry leading Hard Money Lending and Trust Deed Investment platform

Adjust the Strategy for the Circumstance

Bubba teed off with a 4 wood on the 72nd hole to ensure accuracy

Continual improvement

Stay current, watch trends, react to a changing landscape

6

Be Quick but Don’t Hurry

John Wooden, world renowned and legendary UCLA Basketball Coach and Author of the “Pyramid of Success” said “Be Quick but Don’t Hurry” to his players. In other words, do the right things, but learn how to do them quickly. Author Andrew Hill recounting his playing days with Wooden, says, “Life, like basketball, must be played fast—but never out of control.” In today's competitive global workplace, lack of quickness results in competitive disadvantage while hurrying causes mistakes. Balance is one of the keys to agility. “John Wooden’s genius was in helping his players find and maintain that razor’s edge between quickness and hurrying. This quote also applies to the Hard Money Lending business and the below table shows what Lenders do that apply and live by this quote: The table below shows what it means to “Be Quick” in the left column and what characteristics are inherent in a “Don’t Hurry” approach in the right column. You may want to consider these facets when choosing a Hard Money Lender (HML):

Be Quick Don’t Hurry Quick Preparation Preparation is paramount. Make sure your HML has the required

Real Estate Broker and NMLS License. Compliance is required across the origination spectrum and all facets of the loan process.

Quick Decision on Scenario

Is the HML available? Responsive?

Quick Communication Email, text, phone, social media, anywhere anytime access to loan and due diligence files

Quick Valuation Does the HML use all available valuation tools including AVM’s BPO’s, personal Drive By’s, and Appraisals in order to render a quick valuation and loan quote?

Quick Underwriting Be Fast but not Reckless. Thorough underwriting requires, automated checklists, diligence to acquire the necessary documents, experience on what documents are necessary.

Quick Problem Resolution Does the HML wiggle away when a problem arises with the file? Good HML’s don’t duck problems but deal with them directly and fairly. Direct communication, understanding of situation. Address the issue.

Quick Loan Documents Online docs? Current compliance? Accuracy the 1st time crucial.

Quick Closing Online ordering for Title and Escrow? Quick Preliminary Title Reports in 24-48 hours? Online transaction management?

Quick Servicing Fast response to inquiries, online access, borrowers multiple ways to pay their mortgage, quick response to payment issues

7

What Have You Learned?

I am more bullish on Trust Deed Investing than ever! I just

experienced how equity protection, capital preservation and

oversized risk adjusted returns are all very real and alive in

the world of Trust Deed Investments.

After almost 3 years, one of Mortgage Vintage, Inc.’s 1st Trust

Deeds, turned REO just sold. The original borrower

committed fraud, sued all parties involved, filed bankruptcy,

extorted funds from the lenders and generally was a bad guy.

The investors hung in there, contributed on capital calls for the litigation, foreclosure and rehab costs and

through all these trials ended up with a 10.50% annual yield!

I heard a quote recently that resonated: “The trials that you go through and the blessings that you receive are the exact same thing”. While I would not wish this “loan gone bad” experience on anyone, we learned through the entire process and will be a better Hard Money Lender as a result. Here are a few lessons learned from this Trust Deed Investment:

Origination:

• Verify the Zoning of a Property on the Property Profile. Make sure that an SFR is zoned an SFR, Duplex is zoned a Duplex and a Tri-Plex zoned as a Triplex. Make sure the Appraisal/BPO values the property as Zoned.

• Borrower needs a separate source of income besides rental income on a cash-out loan

• Avoid litigious people. If they have sued once, they will sue again.

• Make sure the loan documentation is in order. Occupancy, Loan Type, Disclosures, Business Purpose documentation

Servicing, Foreclosure, Bankruptcy and the Trustee Sale:

• Use a qualified and experienced Foreclosure specialist

• Bid less than what you are owed at the Trustee Sale

• Hire an Attorney that knows the intricacies of the hard money lending industry

Rehab and REO Sale:

• Rehab and repair the high impact items related to the resale value

• Pick a licensed General Contractor and check references

• Review the major Sub-Contractors and their qualifications and references

• More visits to the property the better to keep the project on track

• Visit the Comps and adjust sales price accordingly

• Be careful not to guarantee Section 1 Termite clearance to the prospective buyer

• Don’t stage the property until all the permits and construction is complete

8

8 Ways to Stay Current

My wife and I spring cleaned our house over the weekend and felt refreshed and invigorated. Out with the old to make room for the new. I cleaned my closets, storage areas, hard drives and double checked my wallet to eliminate any Credit Cards I don’t use. I embraced Monday with a new fervor to stay current, relevant and well positioned. Staying current in today’s hustle bustle world takes work. Successful business’ need to listen, iterate, test, listen, iterate, test and continue repeating the process. How does a business owner stay current and up to date? Here are 8 ways that I use to Stay Current:

1. Listen to Clients: Clients give feedback on pricing, service and product demand. Listening to clients tells me what the needs are in the marketplace that we can possibly satisfy with a product or service.

2. Follow Industry Leaders: In private money lending the authority is our Trade Association called the California Mortgage Association (CMA). The stories and insight that industry veterans provide shortens the learning curve and helps maintain compliance and effective strategy.

3. Network in Person: Email and phone calls work but sometimes the best insight comes from a real-time conversation. Try to get out to Networking Events at least a few times per month.

4. Ask Vendors: Good relationships with Vendors can impact your pricing and service levels while facilitating industry best practices.

5. Technology Update: Staying up to date with handheld devices, computer hardware, systems and software will pay dividends. Recently our company implemented e-signing capability that allows our clients to save time and expense while providing additional security.

6. Sharpen the Saw: Keeping licenses current is mandatory. Many webinars and other classes teach how to provide a better service and customer experience.

7. Social Media: Whether it is Facebook, LinkedIn, Groups, Blogs or Twitter, these online tools provide fresh news, feedback and opportunities for business growth and improvement.

8. Listen to Podcasts: These are my favorite Podcasts below and their key benefits

Podcast Name - Author Topic Key Takeaways Pimco Investment Outlook – Bill Gross

Investment world outlook from the Bond King

Perspectives from Wall Street to Main St.

Smart Passive Income – Patrick Flynn

Online Business, Blogging and Passive Income

Work hard now so you can reap the benefits later

This is Your Life – Michael Hyatt

Dedicated to Intentional Leadership Live with more passion, work with greater focus and lead with extraordinary influence

Entrepreneurial Thought Leaders – Stanford University

Speakers from the Stanford Technology Ventures Program

Latest ideas buzz from Silicon Valley superstars

Joel Osteen Podcast – Joel Osteen

Discover the Champion in You Faith filled life

EntreLeadership – Dave Ramsey EntreLeadership Charismatic, passion, integrity, perseverance, positive, flexible

9

6 Ways to Start Learning Like a Machine

Apple’s Siri on the iPhone amazes us all with her witty responses and incredible knowledge. IBM’s Watson Super Computer beat the best brains in the world at Jeopardy and is now tackling real world problems including medical diagnosis and underwriting. What do these machines have in common? They both learn from their mistakes. The promise of Artificial Intelligence or Machine Learning is finally making its way to reality. As we all reflect on our accomplishments and challenges from this year, how can we advance our companies and learn like a machine? How can we turn failure to our advantage and fail forward? Below are 6 ways to start learning like a machine and some examples of agile improvement from the Hard Money Lending business: 1. Create Goals/Objectives/Tactics: I learned the infamous Goals/Objectives/Tactics approach to business strategy during my days at IBM and those disciplines and metrics serve as the basis for machine learning. The key is to establish metrics and measure. Quantify everything. Once the data is available then bubble up the important which, when measured and attained, will increase revenue and profits. An example in the lending business is setting a goal to increase the average loan amount by $100k by the end of 2014. The objective might be to increase loan amounts from $250k to $350k and the Tactic to accomplish the objective might be to acquire better leads by joining a networking group in a higher priced neighborhood.

2. Acknowledge Failure and Take Responsibility: Failing means you are in the game. Take solace that the mistake happened live and learn like a machine. Remember, failure is not fatal, but failure to change may be. I had a loan that went into foreclosure and I later realized that the borrower’s income was too dependent on the rental income from the property. Now we apply new and improved ability to pay rules to our underwriting.

3. Check the Competition and External Data Sources: When establishing metrics for your business, check out the competition and industry sources for clues. For example if a lender is measuring and trying to increase their interest rates and margin, check out rate sheets from other lenders.

4. Garner Facts from Relevant Data and Induce Change from Data Nuances: Facts are that the new Dodd Frank law is changing the lending landscape. Smart lenders are looking at these new regulations and are crafting new loan programs that fit into new niches created by these new rules.

5. Read between the lines and Recognize Patterns: Sometimes we have to learn the hard way when we have to pay for a mistake. On one loan we made, a triplex really wasn’t a tri-plex. The property was a duplex with a bootlegged third unit. I learned my lesson. Now I always check building permits on a property at the City’s Planning Department.

6. Establish new Metrics and Measure Again: Be an “Agile” learner. Crystalize the important data and discard superfluous noise. Establish the metric, measure, iterate and measure again. Repeat this process and improve across your key performance indicators.

10

Interest Never Sleeps”

Gordon Gekko, Hollywood’s famous Investment Banker, coined the Term “Money Never Sleeps” in the 2010 Film, Wall Street-Money Never Sleeps. A more specific and enlightening quote came from Jack Heidt, Former President of Union Bank of California during the 1980’s who said when I asked about perspectives on his illustrious banking career, “Interest Never Sleeps”. Let’s take a look at this quote and what it means to Lenders and Borrowers: A Real Estate Lender’s Perspective:

1. Interest on invested capital earned every day, all day and night, adds up. The below table shows how a Trust Deed Investment for $240,500 that earned a 10.00% yield over the course of the 618 day loan provided the Lender with $20,362 of smart passive income.

Description Amount

Property Address: Los Angeles, CA

Original Loan Amount $240,500.00

Lender Loan Portion % 50.00%

Lender Loan Portion $120,250.00

Total Interest Paid for Term $20,271.80

Total Late Charges for Lender $91.03

Total Interest and Fees $20,362.83

Loan Commencement 2/6/2012

Loan Payoff 10/16/2013

Total Days of Loan 618

Net Interest Per Day $32.95

Annualized Interest $12,026.59

Annual Realized Yield 10.00%

2. Remember the Rule of 72: The Rule of 72 says to divide your yield into 72 to determine the amount of time for your money to double in value. So, if you earn 10% on your money, it will take 7.2 years to double your money. (72/10=7.2)

A Borrower’s Perspective:

1. Explore Positive Arbitrage: Lower interest rate loans can be invested in a project providing a higher return that provides a positive arbitrage on the capital. Example: A loan at 4% invested at 10% earns a 6% positive return.

2. Define and Execute the Exit: Higher interest rates can erode profits for real estate investors. A timely exit of the investment through a refinance to a lower interest rate or the property’s sale can capture the projected return.

11

Making Others Successful

At Mortgage Vintage, Inc., we strive to make others successful. We want our innovation and refined origination process to transform our customers into something else; something more successful. Success however, has varied characteristics for different constituents. This Blog highlights some of the outcomes and success’ we desire for our clients and business partners including:

1. Mortgage Brokers 2. Rehabbers 3. Real Estate Investors 4. Lenders

Mortgage Brokers:

• Commissions for providing Mortgage Vintage, Inc. with the loan opportunity

• Respected by Borrower for being professional, fast and creative in providing a solution

• Lead Conversion Ratio and Time Efficiency. Converting a conventional loan turn down lead into a Hard Money Loan increases efficiency and income for a Broker.

Rehabbers:

• Enable their business’ to provide consistent service and results

• Improve neighborhoods and communities while providing a family a revitalized home

• Solve problem properties for sellers and under water lenders

• Using Hard Money, Rehabbers are enabled with additional liquidity and leverage to improve their cash flow and grow their business

Real Estate Investors:

• Leverage their own cash and equity for more profits and income opportunities

• Maximize utilization of their own resources to achieve higher investment yields

• Capitalize quickly on market opportunities

• Effective partnership with a lender that can creatively provide solutions to difficult loan scenarios while maintaining a fast, professional and compliant approach

Lenders:

• Wealth accumulation and increased yield

• Smart passive current income. More mail box money

• Reduced risk of their portfolio using Real Estate Debt vs. Wall St. instruments and Equity in Real Estate

• Improved life style and comfort knowing that the investments are secured by California Real Estate with substantial equity protection

12

All Great Things are Made Simple

Winston Churchill, one of the most famous Statesmen of all time who led England during World War II, once said "All Great Things are Made Simple". During the Wars darkest days, Churchill successfully motivated the British Empire to fight vigorously and courageously through his succinct messaging and prose. Former Apple CEO and famous Entrepreneur Steve Jobs said, "Focus on Simplicity. Simple can be

harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s

worth it in the end because once you get there, you can move mountains." We all know about how the IPhone has changed the world through its powerful but simple interface.

Churchill and Jobs, arguably two of the most impactful leaders in the last 100 years, focused on keeping things simple. Their focus on simplicity allowed the masses to understand and follow. A Hard Money Lender and Trust Deed Investment provider should make finding a loan and earning a high yield simple.

These quotes are meaningful to me because I have always strived to make things more efficient and simple. Challenging the status quo and truly understanding the needs and goals of the customer are requirements to making things simple. I always think of the phrase “KISS” (Keep It Simple Silly) when I design or create a new system or workflow. Whether working at IBM to help streamline mortgage operations at one of the Nation’s largest banks or at First American Corp. working to improve RESPA and Settlement Services processes, the software and service we developed worked to simplify the current complexity. While the underlying lending process may be complicated and cumbersome, a quality Hard Money Lender will mask these intricacies and provide a simple process for both Borrower and Investor. The beauty of a Hard Money Loan is that the loan is based primarily on the Equity in the property. The agonizing root canal of a conventional loan is not required to acquire a private money loan. A borrower should receive:

• Fast underwriting decisions

• Fast and comprehensive conditions to fund

• Reliable commitments

• Creative and compliant loan programs and documentation

• Timely, personalized service The subsequent Trust Deed Investments are equally simple, transparent and efficient. Fractionalized Trust Deed Investments typically provide:

• High yield returns in the 9% - 12% range

• Smart passive income

• Significant equity protection

• Investment transparency with no hidden fees

• Varying investment amounts starting at $25,000 for 1-5 years

13

“Life is About Opportunity”

I attended a breakfast meeting with Terry Donahue, former illustrious UCLA Head Football Coach, and he mentioned “Life is About Opportunity”. Terry currently give’s high school football players opportunity to receive a college football scholarship at his California Showcase. (http://cashowcase.org) In 2012 450 player athletes worked-out in front of 30 College recruiters. These schools offered 74 scholarships and changed the trajectory of 74 lives. Terry said, “Just giving the kids a chance is exciting”. Similar to California Showcase giving the opportunity for High School Football Players to earn college scholarships, Private Money Loans give the opportunity for an equity rich borrower or real estate investor to succeed. The following 6 scenarios describe the “Opportunity” to acquire and benefit from a Hard Money Loan. 1. When time is of the essence: Sometimes a seller needs to sell the property quickly. A Hard Money Loan can compete with all cash buyers and close in 7 to 10 days. Whether the timing situation is a short sale with a bank deadline or the need to replace a conventional loan that was denied at the last minute, hard money loans can be fast.

2. When a borrower has not sold their home yet and wants to buy a new home: Bridge Loans for a purchase of a new home give time for a borrower to sell their principal residence.

3. When a person’s credit is temporarily impaired: Short sales, foreclosures, sudden medical expenses, loss of job can all impact a Credit rating. Borrower’s with less than stellar credit can qualify for a Hard Money Loan based on the equity in the property

4. When a person is self-employed and does not have enough W2 Income for conventional financing: While being self-employed offers many advantages, W2 income which required by Fannie and Freddie is not one of them.

5. When an investor wants to leverage their cash and fix and flip or fix and rent a property: Many fix and flip loan programs offer loan to value’s above traditional financing when the rehab funds are included in the loan amount. Borrowers get to conserve and leverage their cash to invest in additional real estate investment opportunities.

6. When business owners need cash out for a business purpose: Business owners may have opportunities to buy other businesses, take advantage of strategic acquisitions, capitalize on marketing opportunities or just infuse working capital. A hard money loan to cash out of equity laden real estate is many times the fastest and least expensive source of financing for a business.

14

Better to Be an Inch Wide and a Mile Deep than a Mile Wide and an Inch Deep

Can you say Focus?? When I first entered the Real Estate Business

with Coldwell Banker Commercial (CB) in 1989, I heard a saying

about focus that I still apply to our business today. “It’s Better to

Be an Inch Wide and a Mile Deep than a Mile Wide and an Inch

Deep.” This quote suggests that specific knowledge, expertise and

a niche focus are keys to success. At CB this mantra meant that I

needed to start my commercial brokerage career by learning a

“farm” area and becoming an expert in that farm. An effective

broker’s path to success was to get to know every street, every

building, every owner and every tenant in that farm, become an

expert, and develop those relationships into commercial real estate

brokerage transactions. Focus and discipline in the Hard Money

and Trust Deed Investment business today remains equally

important.

Here are 5 reasons how a clear focus and a defined niche benefits

our brokers, borrowers, lenders and investors:

1. Goals and Roles: Specific and tangible goals are a critical part of our Business Plan, loan

origination and Trust Deed Investment process. These company goals trickle down to specific

individual goals and roles that help our team members stay focused. Whether the task is

marketing, financial, servicing or processing, everyone knows their goals and roles.

2. Loan Programs: Knowing that our specialty is in business purpose and investment bridge loans

helps us determine what fix and flip and fix and rent loan programs to develop.

3. Lending Opportunities from Rehabbers, Brokers: When other participants in our mortgage

lending industry know exactly what Mortgage Vintage, Inc. does (business purpose loans) and

sometimes more importantly what we don’t do (owner occupied purchase loans), this recognition

facilitates solid and consistent loan submissions.

4. Systems and Workflow: The entire Mortgage Vintage, Inc. ecosystem is designed from the

ground up for finding, originating, underwriting, processing and servicing private money loans.

Our web-based applications, networks, social media, hardware, software and website

infrastructures are designed to originate and fund the best Trust Deeds in the Industry.

5. Compliance: Dodd Frank, Reg Z (TILA), Reg X (RESPA), High Cost, SAFE Act, and other

Federal, State, Civil and Business regulations apply to Private Money Lending. These rapidly

changing regulations and guidelines must be strictly adhered to. A focused approach to this

specific hard money lending niche makes compliance to the ever changing regulatory and legal

environment possible. This compliance allows borrowers and lenders to feel secure that they are

entering into a transaction that has correct documentation, terms and conditions.

There are many paths to profits and losses in California Real Estate. The key is to not spread your efforts

too thin and instead to become an expert in a niche.

15

Capitalizing on “The Cloud”: 5 Ways Enhance Borrowing and Lending

Cloud computing is the use of computing resources (hardware and software) that are delivered as a service over a network (typically the Internet). End users, like Hard Money Lenders (HML), access cloud based applications through a web browser or a mobile application while the software and users’ data are stored on servers at a remote location. This new computing paradigm, vs. the old client/server, approach allows Lenders to deliver better service to brokers, borrowers and lenders:

1. Cloud Applications: Lead Generation, Loan Origination Systems, Automated Underwriting, Vendor Management, Escrow and Title and Servicing systems are all available now in The Cloud. These systems are available from any web browser and allow enhanced communication and transaction management between all parties.

2. Dropbox: Dropbox is a file hosting service operated by Dropbox, Inc. that allows users to create a special folder on each of their computers, which Dropbox then synchronizes so that it appears to be the same folder regardless of the computer it is viewed on. Files placed in this folder are accessible through a web site and mobile phone applications. This wonderful tool allows HML’s to share due diligence and relevant data with other transaction participants.

3. Websites: Today’s new websites are not only a wealth of information for visitors but critical to many HML transactions. Online loan applications, pricing, and Trust Deed Offerings are all part of many HML websites today

4. Social Media: Facebook and LinkedIn are both cloud based applications that HML’s use to publicize their offerings and contribute to discussions. Facebook “Pages” offers a business page for HML’s while LinkedIn Groups provide forums for peer based problem solving and dealings.

5. Anywhere Anytime: The Cloud provides freedom. Freedom for remote workers to not have to drive to work every day. Freedom for HML workers to work from home, office, mobile phone or Tablet. These new work protocols help reduce response times, and increase the speed of many HML transactions. My main working associate lives 60 miles away. The lengthy 90 minute commute simply prohibits here from working in the office every day. Without Cloud Computing, we could not work together.

16

Fast – Fast - Faster

After spending my early career in Bank, Title and Mortgage

Company software sales and marketing, I learned how to make

processes fast and efficient. Whether the software automated

origination, underwriting, vendor management or servicing, I

always tried to understand the current workflow and then apply

current technology capabilities to improve speed, accuracy and

efficiency.

I now apply these same speedy yet comprehensive principles to

our Private Money lending business. Many times speed is of the

essence in making a hard money loan. In one rehab loan instance we were able to close a loan in 48

hours; however in most instances a 5-7 day turn time is available. Whether the loan is to purchase a Short

Sale, REO, or when a conventional loan has fallen out of Escrow, a fast and efficient hard money loan

process is critical to closing a successful loan.

Mortgage Vintage, Inc. processes loans faster for Brokers and Real Estate Investors by:

1. Utilizing the most widely used Loan Origination System (LOS) to provide compliance, parallel

task accomplishment, loan tracking and completeness.

2. Leveraging the Nation’s largest Cloud based Document Preparation application to draw

documents correctly the first time. The application applies Rules Engines and automated

compliance checking to ensure that all required forms are included in the loan package.

3. Online Title and Escrow opening, status and task management facilitates timely payoff requests

and chain of title issue resolution.

4. Deploying an automated Underwriting Checklist that manages and resolves loan conditions

quickly.

5. Having access to multiple funding sources including direct funding ensures that the loan will

close as committed.

In addition to these specific efficiency techniques for Brokers and Investors, Mortgage Vintage, Inc., also

speeds up processes by:

1. Providing same day response to inquiries

2. Being directly accessibility by phone or email

3. Understanding and tracking lender preferences that matches a loan scenario with the appropriate

lender

4. Being experts at what we do – Determining private money viability for the loan scenario

5. Utilizing E-Signatures on Initial Disclosures and Lender Documents enhances turn-around time

17

Don’t Fight the Fed!

How does an investor get income from their hard earned savings? How does an investor get a high yield return in today’s low interest rate environment? Well, there is one thing for sure: Don’t Fight the Fed! This mantra means that investors should realize that high yield is not going to come from traditional savings vehicles correlated to interest rates that are influenced by the Fed (Fed Funds, Treasuries, Prime Rate, LIBOR et al). Interest Rates haven’t been this low in the U.S. in at least a century and the Fed plans to keep rates low. When the Fed’s rate setting committee announced the open ended commitment to quantitative easing, “QE Infinity” in Oct. 2012, they set forth their plans to keep interest rates low.

Investors are painfully aware of the following low interest rates on Wall Street investment vehicles that are typically used to provide current income:

• A 10 year Treasury note yields 1.7 percent a year and a one month Treasury Bill has an annualized return averaging just .05 percent over the past year. Inflation is running at 2% so you are actually losing money by putting money into Treasuries

• The average yield for stocks in the Standard & Poor’s 500 stock index was 2.2 percent as of Dec. 2012

• A Bloomberg REIT index had a 3.5 percent dividend yield as of Dec. 12th

• The FINRA – Bloomberg Active Investment Grade U.S. Corporate Bond Index yielded 3.4 % in Dec. 2012

• Municipal Bonds yields are at a 47 year low at 3.3% as of Dec. 2012, Source: Business Week, Dec. 2012

I could keep this list going with all of the investments that are providing abysmal returns including Money Market Accounts, Bank Savings Accounts, CD’s and others but I like to think of solutions not just problems.

Yield choices for Don’t Fight The Fed Investors:

1. Accept low yields on Wall Street investments, however, for most people, though, being ultra-cautious won’t produce the growth needed to pay for the children’s college or a golden retirement.

2. Try a Wall Street “Alternative Investment”. These “Alternatives” (REIT’s, Junk Bonds, Master Limited Partnerships and others) provide a marginally better return in the 4%-6% range, however these investments carry higher risk and are completely correlated to the Stock Market. If the Market swoons, so does the principal in these investments.

3. Invest in non-correlatedTrust Deeds that provide a high yield with real estate as collateral securing the investment. Most investors feel they have to seek safety at the expense of yield. Well, not with Trust Deed Investments!

18

I May be Small but I can Do Big Things Walking with my 3 year old son the other day, he blurted out “I may be small but I can do Big Things”. I looked at my wife and we both started laughing out loud. I thought about my Son’s profound comment and realized how his statement applies to my private money lending and trust deed investment business. We may be small but we deliver big things! Those 3 big things are: 1. Big Returns for my Lenders 2. Big Protection for Lenders 3. Big Opportunities for Brokers to earn additional capital

Big Returns: Our returns to our investors average 10.67% annually. We have experienced $0 losses and our investors in 2011 received almost $500,000 in current income from interest payments. I call these oversized returns “smart passive income”. Smart because of the risk protection and passive because these are debt investments and do not require time consuming management from the investor. Big Protection: Through the use of the industry’s premier service providers, Mortgage Vintage, Inc. provides quality loan origination that is unsurpassed amongst private money lenders. The nation’s Leading Loan Origination System (LOS) is deployed to all employees in the company and ensures complete and thorough data gathering and underwriting. Our industry’s leading document management provider provides customized documents for all types of loan programs and ensures compliance through system generated audits and due diligence. We leverage the nation’s largest private money Servicer to collect payments, pursue defaults and process payoffs. These service providers coupled with Mortgage Vintage, Inc. managements 30+ years of experience in the Financial Services industry facilitate a great choice of loans for investors and Big Protection from investment risk. These operational factors contribute to protection for an investment, but equally important is the inherent protection in a Trust Deed Investment. With a typical 60% Loan to Value ratio in place, a Trust Deed Investment provides 40% of “equity protection” before the first investment dollar is exposed to loss. We understand the importance of accurate valuations on properties and use multiple authorities for valuation efforts coupled with enlightening property and borrower visits. Big Opportunities: Private Money Loans offer a mortgage broker with a way to substantially increase their income. Smart Mortgage Brokers understand that when a borrowers business purpose loan can’t be financed conventionally, that the loan might fit in the private money lending arena. Smart Broker’s understand the basic parameters of fix and flip, fix and rent, bridge and small commercial loans and when they come across one of these loans they send the loan to Mortgage Vintage, Inc. and enjoy a loan process that will decide quickly and fund on time at the stated terms. “I may be small but I can do big things” is a great saying for all of us to remember and apply to our lives. How about doing something Big for yourself? Submit a loan or invest in a Trust Deed and experience Big Returns, Big Protection and a Big Opportunity to succeed!

19

Yield Olympics: Trust Deed Investments Win the Gold Medal

USA Today recently reported that "Money funds are yielding an average 0.03%. The highest-yielding one-year bank CD, from CIT bank, is yielding 1.1%, says Bankrate.com — $5,500 a year from a $500,000 deposit."

OUCH! If you're tired of seeing your money tied up in low-yielding accounts, we have good news! You can learn how to make 9-12% annualized returns (and sometimes more)! The Gold Medal of risk adjusted yields in today’s investment climate clearly goes to Trust Deed Investments. Consider the yield on what is believed to be one of the safest investments around: The 10-year U.S. Treasury note. Currently, investors who buy the 10-year Treasury earn a "whopping" yield of 1.5%. If inflation is 1.5% or more over the next 10 years, which isn't hard to imagine, that means investors are essentially getting no return on their money. Oh, how about those safe Certificates of Deposits (CD’s). Well, check out these recent rates/yields for CD’s:

• 1 Year = .30% • 3 Year = .90% • 5 Year = 1.49%

If a Real Estate Investor needs current income, how are they going to survive on these kinds of Money Fund, Treasury or CD Rates?

Maybe you are a stock market investor. You like to play the Wall Street game. Let’s see how those Dow Jones Industrial returns have stacked up over the last 5 – 10 years?

• 5 Year = 1.13% • 10 Year = 1.20%

Not only are you receiving paltry returns from Wall Street Equities and Bonds, but you are also subject to wild fluctuations and volatility that can really wake you up in the middle of the night! OUCH AGAIN! If you're tired of seeing your money tied up in low-yielding accounts, we can show you how to invest in First Trust Deeds and make, on average, 9-12% annualized returns. A far cry from the minuscule return at your bank or on Wall Street!

Trust Deed Investments from Mortgage Vintage, Inc. provide the following to Yield Seeking

Investors:

• 1 to 3 Years • 9.00% to 12.00% Paid Monthly • Secured investments with transparent and simple to understand lending criteria • Significant Equity Protection that covers market fluctuations