IMH Secured Loan FundI have posted before on IMH Secured Loan Fund. This is an Arizona-based mortgage loan company that made early-stage development loans to primarily home builders. It has most of its mortgage investments in California, Nevada and Arizona, but has also made loans in other parts of the country. It announced that is suspending withdrawals and new capital. It's
8-K stated the following:
Management Policies | | • | | Maintain capital to honor all Fund commitments and obligations. |
| | • | | Manage and protect the existing portfolio effectively. |
| | • | | Remain steadfast against “fire-sale” liquidation of Fund assets. |
| | • | | Continue to make meaningful pro-rata cash distributions on a monthly basis to Fund members. |
Management Actions
| | • | | The Fund will suspend accepting any additional member capital. |
| | • | | The Fund will suspend re-investing monthly distributions. |
| | • | | The Fund will pay all future monthly distributions in cash. |
| | • | | The Fund will cancel all pending redemption requests in order to safely maintain capital for managing, protecting and preserving Fund assets. |
| | • | | The Fund will not accept any new redemption requests. |
| | • | | The Fund will continue to work toward meaningful distributions to its members. |
The 8-K said that since the credit crisis started it has experienced unprecedented withdrawal requests. This is not surprising. What is surprising is how much money IMH has raised over the past year ($127 million of new investor contributions through the first six months of 2008) despite problems in the credit market and the housing market. The third quarter 10-Q should provide more insight.
6 comments:
Well! I would suggest that IMH deserves some accolades. The company is taking steps to preserve capital and liquidity while continuing to provide the primary source of returns to investors. The company telegraphed the problems of its borrowers nine months ago and has apparently been managing defaults aggressively by pursuing foreclosure and marketing properties quickly. That the Fund continued to raise capital was a testament to the lack of product in an attractive space. Unfortunately, the latest action by IMH reflects the real reason for the lack of product: crummy economics for the borrowers.
I was closer to the IMH last year. It is not surprising that IMH kept offering its product, I was surprised that b/ds kept investing client money. IMH's amount of foreclosed assets kept rising last year. I am curious at what rate and for how long the distributions will be maintained. The crummy economy and over supply of houses should drag on mortgage companies for sometime.
It's now the end of November. Do we have any additional information on IMH? I read they had over $100m of bad debt on their hands. How does this get disposed of in this market and how do investors keep getting monthly payments if the money is flowing out - not in (redemptions and bad debt).
It's now the second week of Dec. IMH is not a levered company and describe their current position as "hibernation". It seems uncertain how long they can maintain this position waiting for the economy to improve.
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