In the effort to provide our investors and the community with accurate, up-to-the-minute information, following are answers to some of your most frequently and recently asked questions. They specifically address the recent tide of media attention to the current housing crisis and to the difficult position that we now find ourselves in.

Q. Why has it been so difficult to get answers to my questions? Why, for example, could we not have just one large meeting?

A.    As the national housing crisis began to unfold, affecting not just our company, but most other lending institutions across the country, the number of phone calls and emails we received escalated into the hundreds each week. Given our limited staff, it became impossible to respond to them all individually. In addition, we wanted to give each and every project the time it deserved to come up with a tailor-made plan that would best serve its investors.  Large group meetings, or one big assembly, would not serve anyone very well, as too few of you would have the chance to make your concerns known, let alone get them addressed. Instead, we have been meeting daily with individual investors and have initiated a weekly series of small meetings with no more than a dozen investors at a time.

Q. What is Estate Financial doing to improve communications with me and their other investors?

A.    These regular messages are just one of several new methods of providing clear, concise, and current information to our investors. In the effort to mitigate the sometimes skewed perspective of print and broadcast media, we have hired a respected PR firm to make sure our side is heard. You are invited to visit our website www.estatefinancial.com for news as it happens. The “News” tabs are updated regularly to keep you informed without having to call us. And finally, we have set up a simple online method for you to use in order to access your account with us.

For individual trust deed investors:
1)    Go to http://www.lendersviewcentral.com/
2)    Company ID is “EFI”
3)    User ID is your account number. Example “L1234”
4)    PIN is the last 4 digits of your tax id or social security number.

For The Mortgage Fund:
1)    Go to http://www.lendersviewcentral.com/
2)    Company ID is “EFI”
3)    User ID is “EFMF”
4)    PIN is 4321

CONFIDENTIALITY NOTE:  The information contained above is intended for the sole use of members of the Estate Financial Mortgage Fund, LLC and is deemed to be privileged and confidential by the sender. If you are not a member of the Fund, you are not authorized to access this account and further you are hereby notified that any duplication or distribution of this communication or account information is unauthorized.

The process for updating this account information will be time intensive. Please be patient and check back weekly for updates.


Q. During the past five months, while my investments have not been performing, what has Estate Financial been doing to protect my interests?

A.    Estate Financial has been working around the clock, negotiating with individual borrowers about finding the best approach to dealing with their unique projects. As the un- anticipated conditions of the current real estate market began to be imposed on our offerings, we also started working with our securities experts, title companies, insurance companies and various municipalities to facilitate the protection and transfer of properties and the maintenance of entitlements on various projects.

Q. Why did the regulatory agencies get involved?

A. On April 14th, 2008 as a direct result of a local newspaper article and several investor complaints filed with the California Department of Real Estate and the California Department of Corporations, both agencies arrived at our offices with an auditor and an investigator.  The investigators spent a few days with us asking both general and specific questions about our business and business practices.  We understand that the investigators then conducted numerous interviews over several days with the people who filed the complaints, many of which we’ve now seen.  The auditors for both the DOC and DRE remained in our office for a full week, and continue to work on their audits even today.  We are cooperating fully with the two agencies.

On April 28th, 2008 The California Department of Corporations issued an order summarily suspending our recently renewed and rewritten permits that allowed us to make loans and accept new investor funds. The D.O.C. expressed concern that should any new investor money raised under the new offering end up in the same pool as the money raised in the previous offering, the co-existence of investors who came in at different times might result in disparate or unequal treatment.  Estate Financial concurs with the D.O.C. position and has agreed not to raise new investor money under either offering and has further agreed that it will not seek to do so in the future, as that would necessarily treat investors disparately.  With our full agreement we expect the D.O.C. to issue a final order revoking the two permits.

Please take note: The DOC has not taken any action that affects our broker's license. We are still authorized to act under that license, and we believe that protecting our investors is our first and foremost responsibility.

Q. Is all my money gone?

A. No. It’s not possible for all your money to be “gone,” though it is easy to understand why some investors may feel this way. Unlike stocks, your investments are secured by real estate which will never be worthless. 

Q.  When can we expect things to improve?

A. The media continues to paint a picture of declining home values and many months of unsold inventory.  The decline in the value of entitled land is even more severe.  We cannot expect a meaningful change in the liquidity of the portfolio until these conditions change.  We have seen a slight increase in the number of finished houses being sold, usually at discounts of rarely more than 20%.  We have initiated a number of foreclosures where we see greater value to investors in owning the property and completing it rather than take 50% discounts or subordinate to other lenders. The economic climate, like the weather, WILL improve. How fast will depend upon the availability of credit, the media, and the attitudes and behaviors of individuals.

Q. Is it possible to exchange my shares in the Mortgage Fund for a fractionalized interest in a specific trust deed?

A. We’ve had numerous requests from mortgage fund members who wished to convert their pooled ownerships into individual ownerships.  We’ve investigated this possibility thoroughly with our experts, and they have concluded that it is not something the offering circular or operating agreement currently provides for. In fact there are several clauses in the circular that effectively prohibit this action.

However, as we have received many requests along these lines, we’ll take a moment to provide hypotheticals for the two basic scenarios and the hurdles that preclude this type of transfer.

Scenario 1:  The Mortgage Fund has a $200,000 investment in a house that is incomplete.  One Fund member, who has invested a total of $200,000 suggests that rather than wait for the Mortgage Fund to liquidate his shares over time, he would prefer to trade all his shares today for the Fund’s fractional interest in the house.

While on the surface this may appear to make sense, it fails the test of fairness.  Unless all members have the same opportunity to exchange their investment share for the interest on this specific house, the results from this scenario would be unequal.  Furthermore, the issue of Share Price and Asset Valuation are not addressed in this scenario.

Scenario 2: The Mortgage Fund has a $200,000 investment in a house that is incomplete.  One Fund member, who has invested a total of $400,000 suggests that rather than wait for the Mortgage Fund to liquidate his shares over time, he would prefer to trade all his shares today for the Fund’s fractional interest in the house.  The investor considers this 50% discount a more than adequate offset for any uncertainty in Share Price or Asset Value that now exists.

While this scenario would benefit the members remaining in the Fund by potentially increasing the Share Price, it too fails the tests for fairness and equitable treatment.  Obviously, the opportunity on this specific house would only be available to one member, not all.  More importantly, who would make the impartial determination that 50% was sufficient offset?

It is important to remember that one of the fundamental reasons why the Department of Corporations suspended and revoked our permit to operate the Mortgage Fund was the possibility of disparate treatment among its members.

The passages from our Offering Circular below substantiate our response to this question.

Relevant passages from the offering circular:
 
“The Fund will not establish a reserve from which to fund withdrawals and, accordingly, the Fund’s capacity to return a Member’s capital account is restricted to the availability of Fund cash flow.  For this purpose, cash flow is considered to be available only after all current Fund expenses have been paid (including compensation to the Manager and affiliates), adequate reserves have been established for anticipated Fund expenses, and adequate provision has been made for the payment of all monthly cash distributions on a pro rata basis which must be paid to Members who elected to receive such distributions upon subscription for Interests.”
 
“Notwithstanding anything to the contrary stated above, distributions of capital accounts to any withdrawing Member in any calendar quarter shall be limited to $25,000 per such calendar quarter for such Member.  Additionally, the Manager shall not liquidate (and Members shall not be entitled to withdraw), within any single calendar year, more than twenty percent (20%) of the total Fund capital accounts outstanding at the beginning of such calendar year.”

This FAQs page is updated on a regular basis to ensure that our investors and the community have access to the most current information.