Frequently Asked Questions
How are the funds at Equalize Capital structured?
Equalize Capital manages two funds, Equalize Community Development Fund (EQCDX) and American Home Opportunity Mortgage Fund (AHOMe). The EQCDX Fund is a continuously-offered, non-diversified, registered closed-end fund operating as an interval fund with limited liquidity. The EQCDX Fund has a Net Asset Value (NAV) that is determined weekly and is publicly available on Yahoo Finance, Bloomberg, or wherever you look for stock quotes. The Fund provides quarterly liquidity windows where investors can redeem shares up to a maximum of 5% of the Fund’s shares each quarter. The AHOMe Fund operates as a private investment partnership. The Fund, through an independent third-party, provides monthly updates of investor income and capital account balances. The Fund provides quarterly liquidity windows where investors can redeem shares up to a maximum of 15% of the Net Asset Value of the Partnership each quarter.
What are Community Development Loans?
Community Development Loans, as defined in the EQCDX Prospectus, are loans that are eligible for consideration as community development loans or qualified investments under the Community Redevelopment Act (CRA). The Fund specifically identifies SBA 504 First Lien Loans secured by owner occupied commercial real estate, loans originated under the U.S. Department of Agriculture’s Rural Development programs and loans issued by the Bureau of Indian Affairs as Community Development Loans.
What are USDA Loans?
The U.S. Department of Agriculture (USDA) OneRD Guarantee Loan Initiative seeks to increase private investment in rural businesses and economic development projects. The OneRD Guarantee Loan Initiative includes four programs:
- USDA Rural Energy for America Program (“REAP”) Loan Guarantees;
- USDA Community Facilities Guaranteed Loan Program;
- USDA Water & Waste Disposal Loan Guarantees Program; and
- USDA Business & Industry Loan Guarantees.
What are SBA 504 Loans?
The U.S. Small Business Administration (SBA) developed the SBA 504 Program to promote economic development and create and retain jobs. The program helps First Lien Lenders provide small businesses with long term financing to acquire and improve major fixed assets, such as owner occupied commercial real estate and heavy equipment. The program helps Financial Institutions attract and serve small business borrowers that may not meet conventional underwriting criteria. Participating with a Certified Development Company (CDC), a non-profit corporation certified and regulated by the Small Business Administration to package, process, close, and service “504” loans, can help reduce risk for the Financial Institution. Banks and savings institutions also may receive CRA consideration for 504 First Lien Loans.
What is the American Home Opportunities Fund?
The American Home Opportunity Mortgage Fund (“AHOMe”) is a private investment partnership. The Fund’s investment objective is to provide attractive risk-adjusted returns primarily through acquiring whole ITIN mortgage loans. The Fund buys and holds residential mortgages made to borrowers who use an Individual Taxpayer Identification Number “ITIN” to file taxes. ITIN residential first-lien mortgage loans yield more than agency mortgage loans, with credit performance that generally exceeds conventional mortgage loans with similar income and credit score characteristics. The Fund can help investors meet low-income, underbanked, minority borrower goals.
Who can qualify for the American Home Opportunities Fund?
The AHOMe Fund is designed for financial institution investors with attractive yields derived from a portfolio of residential mortgage loans made to a deserving, yet underbanked community of borrowers. The Fund’s investment objectives are to provide current income, consistent with the preservation of capital, and to enable institutional Partnership investors that are subject to regulatory examination for CRA compliance to claim favorable regulatory consideration of their investment under the Community Reinvestment Act of 1977, as amended (the “CRA”). The Fund intends to qualify as a permissible investment for federal credit unions and savings associations, and as an eligible and appropriate direct investment for national banks. Investment in the AHOMe Fund is limited to persons who are both (i) “accredited investors” as defined in Rule 501(a) of Regulation D under the Securities Act and (ii) “qualified purchasers” as defined in Section 2(a)(51)(A) of the Investment Company Act.
Does Equalize Capital invest in whole loans?
Both of the Funds managed by Equalize Capital invest in whole loans. The Equalize Community Development Fund invests in whole small business loans under the SBA 504 program, as well as participations in whole loans issued under USDA loan programs and Bureau of Indian Affairs (BIA) loan programs. The Fund defines these loans as “Community Development” loans, which Fund management believes will qualify for consideration under the Community Reinvestment Act. The American Home Opportunity Mortgage Fund invests in whole residential mortgage loans extended to borrowers using an ITIN number, rather than a social security number, to file Federal income taxes. This results in a pool of loans that can help investors meet low-income, underbanked, minority borrower goals. Fund management believes these ITIN mortgage loans will qualify for consideration under the Community Reinvestment Act.
Which service providers does Equalize Capital work with?
For the Equalize Community Development Fund (EQCDX) Equalize Capital works with:
- Administrator, Transfer Agent and Fund Accountant – UMB Fund Services, Inc.
- Custodian and Escrow Agent – UMB Bank, n.a.
- Valuation Specialist – Government Loan Solutions, Inc.
- Legal Counsel – Godfrey & Kahn, S.C.
- Distributor – Foreside Fund Services, LLC
For the American Home Opportunity Mortgage Fund (AHOMe), Equalize Capital works with:
- Valuation Specialist – Phoenix Analytics Services, Inc.
- Legal Counsel – Cott Law Group, P.C.
- Auditor – Spicer Jeffries LLP
- Administrator – NAV Consulting, Inc.
Is the Equalize Community Development Fund CRA complaint?
The Equalize Community Development Fund’s investment objectives are to provide current income, consistent with the preservation of capital, and to enable institutional Fund investors that are subject to regulatory examination for CRA compliance to claim favorable regulatory consideration of their investment under the Community Reinvestment Act of 1977, as amended (“CRA”). The Fund seeks to achieve its objectives by investing primarily in a portfolio of loans that are eligible for CRA treatment as qualified investments, including 504 First Lien Loans secured by owner-occupied commercial real estate which represent the non-guaranteed portion of a U.S. Small Business Administration (“SBA”) Section 504 transaction, loans originated under a number of U.S. Department of Agriculture Rural Development (“USDA RD”) loan programs and loans issued by the Bureau of Indian Affairs (“BIA”). Of course, a number of factors influence whether a particular bank will receive credit for its investment in the Fund, including the geographic location of loans held in the Fund, the bank’s record of CRA-related performance in its markets, and examiner discretion, However, investors in the Fund have historically received CRA credit for their investment in the Fund when it has been requested.
How can I start working with Equalize Capital?
We at Equalize Capital will be happy to arrange an introductory phone call or in-person visit to provide details of our products to any financial institution wishing to explore how an investment in either of our funds can benefit the institution, whether you are looking for a competitive investment return with low risk, CRA credit or both. Contact us by email or telephone and we will find a mutually agreeable time to provide you with any information you need to evaluate an investment in our funds.