Navigating the Downturn
Countless homeowners and investors suffered tremendous losses during the real estate downturn that began in 2008. Even as our market now shows positive signs of growth and improvement, many investors still struggle to re-establish their confidence in real estate investments. One of the keys to Anchor Loans’ success has been its ability to remain flexible in the ever-changing real estate market. Remaining vigilant of local and national market trends has not only allowed us to properly evaluate the equity potential of our existing projects, but has given us the opportunity to forecast and prepare for the challenges ahead.
As 2008 approached, Anchor foresaw the approaching downturn in the market as evidenced by the significant decrease in the loan volume funded in the prior two years. During 2006, Anchor reduced the dollar amount of loans funded by 15.4% as compared to 2005. Anchor further reduced funding activity in 2007 by 34.2% of the total of 2006. When the real estate downturn began, there was a further reduction in loan production of 58.9% in 2008 (as compared to 2007).
In addition to preemptively de-leveraging its assets, Anchor prepared an action plan for responding to loan defaults, including directly handling loans that turned into REOs on an investor’s behalf, and proactively working with borrowers to resolve defaults through note modifications, deeds in lieu, and work-outs. Anchor additionally hired a general contractor at its own expense to take care of foreclosed properties. This contractor remains a full-time employee of Anchor who manages Anchor’s construction division for the company’s retail property business (“Anchor Homes”).
One example of Anchor’s performance during the downturn is the yield earned by Anchor’s affiliate mortgage fund, Anchor Fund, LLC (“Anchor Fund”); a mortgage pool actively managed by Anchor’s principals. While many real estate investments lost over 20% during 2008 and 2009, Anchor Fund returned 0.17% in 2008, 2.72% in 2009 and 9.42% in 2010.
By providing excellent service to our investors, maintaining strong working relationships with our borrowers and staying apprised of industry trends and events, Anchor Loans remains a leader in trust deed investments even during challenging markets.