Note Acquisition Financing

Aegis provides transactional funding for the acquisition of non-performing, residential mortgage loans. Just like the traditional Transactional Funding program, the note acquisition funding program is short-term financing provided to investors to fund the acquistion of distressed debt, with the intent to resell the property at a profit shortly after acquisition.

The following are frequently asked questions (FAQ) regarding our note acquisition funding program:

Q: What are the requirements for Aegis to fund the acquisition of non-performing notes?

A: The Aegis note acquisition program is almost identical to the Transactional Funding program in terms of underwriting guidelines. There are, however, a few differences with respect to the documentation needed for underwriting:

• Rather than an A-B contract, you will submit the executed PSA for the note acquisition to Aegis                                   
• In addition to the standard documentation needed, which can be found on the Transaction Worksheet, you will also need to submit the complete loan file associated with the note being acquired.  

Q: What percentage of the profit is allocated to Aegis?
A: As a provider of preferred equity, Aegis is entitled to a preferred return on the capital invested in each transaction. To achieve our targeted IRR for this investment strategy, we have established the following profit allocation schedule:

To the extent the total profit allocated to Aegis on any individual transaction is less than $2,000 based upon the schedule above, Aegis will be entitled to a minimum preferred profit allocation of $2,000. More details regarding our profit allocation can be found in the Aegis Agreement for Acquisition and Resale of Property

Q: In addition to the profit allocation, are there any other costs associated with each transaction?

A: Since we fund transactions based upon the merits of each deal, it is imperative that we perform the necessary due diligence on each transaction (e.g., valuation, market analysis, title history, etc.). To cover the costs associated with this due diligence, the Client pays Aegis $400 for the first transaction, and $250 for each subsequent transaction. This amount is paid to Aegis concurrent with the submission of each new transaction package.

Q: Does Aegis perform a credit check?

A: No. However, as part of our standard due diligence, we will run a full background check - including criminal - on each principal of the company. Aegis is not a lender and, therefore, does not qualify the transaction based upon the Client’s ability to repay the invested capital.

Q: What information does Aegis require in order to begin underwriting a new transaction?

A: In order for us to begin the underwriting process, we must have all of the following information:

1. Aegis Application Form
2. Aegis Short Sale Transaction Worksheet
3. Copy of Drivers License
4. Articles of Incorporation/Organization
5. Bylaws/Operating Agreement
6. Evidence that Corporation is in good standing (as of transaction date)
7. Resumes of all Principals and/or Authorized Signers
8. Brief narrative describing business plan
9. Fully Executed PSA for Note acquisition
10. Complete loan file for Note being acquired  
11. Affidavit of Understanding: Signed by Seller and notarized
12. Payoff/Short Sale Approval Letter; between Party A, as borrower, and Party B, as new Note holder 
13. Fully Executed Contract between Party A and end buyer
14. Evidence that end buyer’s deposit is being held in Escrow (Min. Deposit of 3%)
15. Approval letter from end buyer’s lender (must be from lender, not broker)
16. Appraisal and title insurance for end buyer's transaction
17. Final HUD-1 closing statement
18. Aegis Valuation and Analysis Fee

Q: How long does Aegis take to underwrite, approve and fund a transaction?

A: Typically, our underwriting process can be completed within 7-10 business days from the time we receive all of the information listed above. Given the nature of this business, we are frequently asked to underwrite and fund transactions in 2-3 days. In order for us to properly underwrite the risk inherent in each transaction, we must have at least 7-10 business days. Please keep this timing in mind when structuring your transactions, as we will very rarely make exceptions to this policy.

Q: What issues would preclude Aegis from funding a transaction?

A: Although we are in the business of investing capital, our primary objective is to generate superior risk-adjusted returns, while preserving our investors’ capital. In order for us to achieve this objective, we must fully vet each transaction before making an investment. As such, we will not fund transactions where the following characteristics are present:

Buyer’s loan is not fully credit approved, with the only remaining conditions being appraisal and clear title
Title history shows multiple foreclosures, flips and/or deed transfers over the past 5 years
Subject market is still in a state of decline with respect to property values, or has an oversupply of foreclosed homes and/or short sales
The spread between the note acquisition cost and selling price is not sufficient to cover the costs of the transaction and provide an adequate equity “cushion” in the event the transaction fails to close 
PSA for note acquisition is in an individual’s name (i.e., we will only provide capital to companies, not consumers)

In addition to the aforementioned issues, we will not fund transactions where we feel any facts have been misrepresented to any of the parties involved (seller, seller’s lender, buyer, buyer’s lender, title/escrow company, and us).

Q: Can I choose the title and escrow company for the transaction?

A: Given the unique nature of these short sale transactions and how we structure our capital contribution, we have approved a number of title/escrow companies and attorneys around the country. A list of these service providers can be found on the Aegis Partners page of this site. Additionally, we may choose to engage legal counsel to represent us in the transaction, which would result in additional closing costs.

Q: How does Aegis protect its investment?

A: As noted above, we are providing equity, not debt. Accordingly, all of our invested capital is at risk without recourse back to our Clients (except for instances where fraud and/or misrepresentation has occurred). However, lack of personal guarantee and promissory note notwithstanding, we are able to mitigate risk and protect our investment by: (i) performing extensive transaction-level due diligence; (ii) taking a pledge/assignment of the note and mortgage as collateral; (iii) being listed as additional insured on the title insurance policy and closing protection letter provided by title insurance company; and (iv) working only with trusted third party providers (e.g., title/escrow companies, mortgage lenders, appraisers, etc.).

Q: How do I get started with Aegis?

A: To be added to our “prospect” database, which we encourage you to do prior to having a deal to submit, please complete the Investor Information Package and return, via email, to application@aegisrepartners.com. This will help in expediting the process once you have a transaction in need of funding. Please note, we don’t “pre-approve” Clients, as our decision to invest is based primarily on the transaction. However, if you have any liens, judgments, or pending lawsuits against you or the company in which you be taking title to the property, we will most likely decline your request.