Shaw Funding’s vision was simple; calm the seas of what all too often seems like a volatile investment universe. Risk management with a low correlation to the major indices was at the top of our list. Our goal was to offer a vehicle that can allow investors to sleep at night and still afford them the ability to see superior long term risk adjusted returns. For Shaw Funding it was just a matter of numbers and making them work for the investor.
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The ability to value the underlying asset is the nuts and bolts of the hard money industry. Managing the risk boils down to ascertaining the “real” value of the asset(s) being pledged as collateral. Although Shaw Funding’s underwriting observes a detailed evaluation process including recent appraisals, AVM’s, BPO, and CMA’s, perhaps our greatest analytical attribute is staying close to home. Understanding the values of our immediate area coupled with the various valuation models helps Shaw Funding get a grasp on an assets real value and as a result, manage the risks involved.
Once a realistic value is established, Shaw Funding limits the scope of its lending to only 65% of the pledged assets value. This allows Shaw to absorb, most if not all of any real estate down turns while making sure our principal investments are secure.
By limiting each loan term to only 1 year, we reduce the exposure to any potentially negatively impacted real estate market. Coupled with a maximum LTV of 65 %, Shaw Funding aims to further manage its risk.
In the case of a default, a default rate of 24% normally applies further increasing the investors’ chances of realizing a superior return.
When issuing loans, Shaw Funding sits in the first Lien position across all the various forms of collateral pledged by the borrower. In very rare cases where the combined LTV of multiple liens is very low or in cases involving additional properties being pledged as collateral, Shaw Funding will consider a second lien position.
Where applicable, Shaw Funding requires a personal guarantee from the appropriate parties to further strengthen a transaction.
The majority of Shaw Fundings Loans carry a full term 12 month prepayment penalty. In the case of early debt retirement the compound rate of return to any specific loan grows exponentially.