When loans become delinquent, PeerStreet’s in-house team and/or external sub-servicers make contact with the borrowers to try to collect past due payments and bring the loan current. When these efforts fail, however, a more hands-on approach is adopted to increase the frequency of outreach, negotiate potential solutions with the obligors, initiate foreclosure or other legal proceedings, secure the property, evict holdover tenants, market the property for sale, etc. In the industry, these services are generally referred to as specialty servicing and asset management.
In most instances, PeerStreet elects to handle these asset management services internally, as this allows for higher touch service, more efficient case processing, better reporting, and improved oversight on the process. When PeerStreet handles asset management internally, it may charge an Asset Management Fee, in addition to the Standard Fee described in the MPDN Supplement to the Private Placement Memorandum dated December 2, 2019 (“PPM 2”), which Asset Management Fee will be disclosed on the corresponding Loan Listing page.
As outlined in the Shared Charges section of PPM 2, when a borrower reinstates a delinquent loan and pays default interest, investors and PeerStreet share in the default interest. At times, however, PeerStreet may conclude that waiving default interest to reinstate the loan is in investors’ best interest. In such instances, PeerStreet may still collect its portion of the waived Shared Charges or a minimum of $1,000 as an Asset Management Fee from the loan proceeds. These fees help cover the additional expenses and time investment that come with high-touch specialty servicing.
The Asset Management Fee may also be assessed at the time of final distribution where PeerStreet accepts a short pay or sells a 90+ days delinquent note, as well as where a property sells at a foreclosure auction or an REO sells after foreclosure. The Asset Management Fee will typically be 1% of net proceeds, but investors should refer to each Loan Listing page for the applicable fee.