To get started in private mortgage funds, Investors can take one of the following three routes:




1.- Investing directly into a professionally managed private mortgage fund




This is the safest option for new investors, because all the responsibilities of underwriting, originating and servicing of private loans, remedying defaults and managing the portfolio are assumed by professional fund managers. The investor’s only concern is to choose the fund and its manager that best meets their investment goals.




2.- Purchasing a loan assignment or new loan from a professional mortgage fund




With this option, an investor owns the mortgage lien and collects the monthly payments from the borrower via a loan servicing company. This option is for the more active investor who is willing to take on the responsibility of vetting each new mortgage investment opportunity with due diligence and is prepared to personally remedy a loan default, should one occur.




3.- Underwriting private mortgages on their own




This should not be undertaken lightly. The investors who choose this option assume total responsibility for finding and vetting each new private mortgage loan opportunity. They also must perform their own due diligence, including the underwriting and drafting loan documents; getting and analyzing environmental reports, credit reports and an appraisal; handling title work, insurance and loan servicing; processing payoff and generating a satisfaction of mortgage. Finally, they are responsible for remedying a loan default should one occur.




Because of the specialized, complex and time-consuming demands of underwriting, investors generally prefer to invest in private mortgage funds where professionals perform these functions for them, freeing the investor to enjoy a return on their investments without time and labor commitments.




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