Why do we use foreclosure agency?

If one of your Real Estate Notes becomes delinquent, we will use a foreclosure agency to help attempt to recover unpaid balances.

How do foreclosure agency fees work?

Foreclosure agencies charge a percentage of any recovered funds as the service fee for their efforts. This percentage varies by the agency, but is typically between 5 and 10% of the funds recovered.

What happens if the foreclosure agency can't collect?

Once the Real Estate Note is one month past due, it is turned over to a foreclosure agency to pursue collection from the Property Owner. If the foreclosure agency cannot collect payment from the Property Owner after a reasonable period of time, within 3 months, the Real Estate Note will be charged-off, and may be some principal might be considered a loss. The property which secured Real Estate Note is eligible for sale at the Public Auction to recover any money on the note. The Property Owner will not be able to borrow ever again from IRESE, and since we report delinquencies to credit reporting agencies, the charge-off will adversely affect their credit report.

When are Real Estate Notes charged-off?

A note is charged-off when it reaches 121 days past due. This means the Property Owner has fallen four months behind in payment.

What does it mean to be charged-off?

• The note's entire balance is accelerated, meaning it is collectible in full as of the charge-off date.
• From the Property Owner's perspective, interest continues to accrue on the principal balance as before charge-off. There are no changes to the interest rate or the way interest is accrued. Late fees are no longer charged.
• From the Investor's perspective, the note's balance (principal + accrued interest + accrued fees) are summed into a "Charge-off balance", which is considered a potential loss.

Charge-offs will remain in collections until some action is taken to end the note. Possible note-ending activities include payment in full, discharged bankruptcy, and sale to property at a public auction.

Payments made by the Property Owner post-charge-off are considered "recoveries", and pay down the note's balance, but the note stays charged-off. Once charged-off, the Property Owner no longer has the opportunity to bring the note current, only to pay it in full.

What are the possible conditions for charged-off Real Estate Notes?

Charge-offs can exist under any of the following conditions, usually denoted below the "Charge-off" status on the note detail page:

• In collections: The note is still actively being collected by foreclosure agency designated by IRESE.
• Foreclosure filed: Foreclosure agency filed for property foreclosure, asserting IRESE rights to collect on the note.
• Paid in full: Although the note was charged-off, the Property Owner has met the note obligation by paying it in full.
• Sold at a public auction: The property has been sold at a public auction. Proceeds of sale are credited to Investors on the note.

A charge-off can change from one condition to another over the life of the note.

How are recoveries handled?

A recovery is just a different name for a payment made on a charged-off note. Depending on whether the note is in collections with IRESE or an outside charge-off foreclosure agency, recoveries may be subject to collection fees. Recoveries may also be used to pay down any accrued failed payment fees, which are paid to IRESE.

When is a property which secures Real Estate Notes sold at a public auction?

IRESE's policy is to sell a property as quickly as possible after charge-off, taking into consideration market conditions. Because public auction sale might take time and note may last several months in charge-off without being sold. Regardless of when the property is actually sold, it will remain in the custody of a foreclosure agency, which will continue collection efforts until the property actually sold at a public auction. Refer to the foreclosure timeline below.

How much of the property sale price will Investors receive?

The entire property sale price will be allocated to Investors after foreclosure agency fees. Each Investor will receive their pro-rata share of the property sale proceeds.

Can losses from a charge-off be written off as a loss for tax reasons?

Generally, losses from a charge-off can be counted as an investment loss for tax reasons. IRESE reports note balances at charge-off and proceeds from sale in an end-of-year Investor statement. Learn more about Investor taxes.

What does it mean for a note to be repurchased?

IRESE reserves the right to buy back Real Estate Notes at any time. If IRESE buys back a note, the outstanding principal balance will be returned to Investors and the note will be marked as "Repurchased".

IRESE typically repurchases Real Estate Notes in accordance with IRESE's 100% Identity Theft Guarantee, under which IRESE has agreed to repurchase Real Estate Notes from Investors if the financing is found to involve identity theft of the named Property Owner's identity.

IRESE is committed to providing a safe and secure exchange, and works with law enforcement authorities to prosecute to the fullest extent perpetrators of identity theft.

What happens to Property Owners whose Real Estate Notes are charged-off?

Property Owners whose IRESE Real Estate Notes are charged-off will have their delinquency and charge-off reported to a credit reporting agency, and will never be able to finance on IRESE again.