Who are the Borrowers and why do they come to HCS Equity?

In the current restricted credit environment, if a loan transaction does not fit the exact guidelines of Fannie, Freddie, or FHA there are simply no traditional bank options available. Many borrowers have substantial equity in their properties but have insufficient income documentation, credit scores, or an overall scenario that just does not fit.

HCS Equity is able to quickly underwrite these transactions based on the property and our internal risk assessment policies, lending private equity to fill this need.

What types of properties do Borrowers seek loans for?

Borrowers seek loans for various types of properties, including commercial, investment, single-family, multi-family, mixed use, and rehabs (fixer-uppers).

Where are the properties located?

All properties are located in California, with the majority in the Los Angeles area. The managing partners of HCS Equity have extensive experience in this area’s real estate market, and have handled thousands of loans for Borrowers since 1997.

What types of loans are available to Borrowers?

Most loans have a fixed term of 1-3 years and are adjustable thereafter, with a balloon payment due at the end of the 5-year term. They are written with interest-only payment options and no pre-payment penalty. Loans are not written for non-profit locations (churches, community centers) or other high-risk properties such as gas stations that may have environmental concerns.

How are properties evaluated?

Properties are fully underwritten for current and potential income, and chances of a loss of income, resale value, current property conditions, environmental concerns, neighborhood trends, conforming use, and the ability to liquidate the property in a timely fashion (the value of the property if it had to be sold on the open market within a 30-day time frame.)

How do Investors learn about these investment opportunities?

HCS Equity sends "potential deal summaries" to Investors via email or fax. These notices provide information such as location, type of property, purchase price, loan terms, loan amount and rate of return to investor.

What are the guidelines to be a "qualified investor”?

The amount of the loan cannot exceed 10% of the investor's net worth, exclusive of home, furnishings and automobiles OR the amount of the loan cannot exceed 10% of the investor's adjusted gross income for federal tax purposes for the last tax year or as estimated for the current year.

What LTV (loan-to-value) ratio are the loans offered by HCS Equity?

All loans are secured with large amounts of equity, typically a maximum of 50% -55% of the current, conservative property value.

What types of investment products can an investor purchase?

HCS Equity offers 1st and 2nd trust deeds secured by one or multiple properties. Investors can participate as a whole loan investor or share their interest in the trust deed with other investors.

A whole loan investor owns 100% of the trust deed and invests the entire amount for the term of the loan.

HCS Equity will also fractionalize trust deeds to provide investors the opportunity to participate in larger deeds or divide their investment among several borrowers.

What rate of return does HCS Equity offer?

Depending on the type of investment selected, the current rate of return varies. Investor yields average between 8.5% and 11%. This rate of return is protected against inflationary concerns due to the short-term nature of the fixed rate term on the loan.

Who collects the borrower's monthly payments?

A neutral third-party company performs all note servicing. Our preferred servicing company is an independent firm with over thirty years experience in the loan industry.

How do I receive my investment return?

Investors receive monthly disbursements of the interest on the loan either by check or direct deposit directly from the servicing company.

Will I have access to my investment if I need to make a withdrawal?

Principal is only returned upon the payoff of the loan; however an active secondary market exists for the resale of trust deeds. HCS Equity has an extensive network of investors that we can access to assist with the liquidation of a trust deed.

Can I invest my IRA or Pension Plan?

Yes. Eligible retirement accounts include Traditional IRA, Roth IRA, SEP/IRA, Keogh Plans, Profit Sharing Plans, and Defined Benefit Pension Plans. *

* Please consult with tax professional to ensure eligibility.

How does HCS Equity make money?

HCS Equity charges the Borrower points on the loan, and also makes a spread on the interest rate charged to the Borrowers compared to what the Investor receives. That amount is paid directly by the servicing company to HCS Equity on a monthly basis as the Borrower makes payments.

Occasionally the front end points may be shared with the Investors to increase the APY (annual percentage yield) on short-term loans. Each loan is negotiated with the individual Investor.

In addition, the Borrower is charged certain normal and customary fees for loan documents and underwriting associated with each transaction.

What happens if a Borrower defaults on a loan?

HCS Equity performs extensive due diligence before issuing any loan to make certain borrowers are able to fulfill their monthly obligations. However, in the unlikely event a property must be taken over, HCS Equity's strict underwriting standards limit the possibility of loss on the principal investment. In such an event, HCS Equity would engage the services of a foreclosure expert on behalf of the investor.