Fund News: Capital Income and Growth Fund – Q1 2016

The number of REO assets that are available for auction has remained steady, with Freddie Mac still being the largest seller. We continue to hear from our auction company contacts that Fannie Mae is going to start selling occupied properties in volume. At this point, we have yet to see any significant number of those assets
coming to market.

However, Housing and Urban Development (HUD) has started selling properties through a program named Claims Without Conveyance of Title (CWCOT). Loan servicers would typically have to foreclose on an asset, evict the borrower, rehabilitate the property and then sell the asset. The servicer would have to advance all the money for these activities and, after selling the asset, would be reimbursed by HUD. HUD and the servicers realized that this
process was inefficient and costly so they started the CWCOT program, which lets the servicers sell the properties for a pre-approved discount without going through the steps outlined above. HUD, as well as many banks, has seen that they are not very efficient at owning and managing real estate and so would rather dispose of it in a timely manner and let the investor community take over. CWCOT is now generating a significant volume of assets for the
auction companies to sell and Stonecrest has started to purchase assets under this program.

The types of programs and the way the industry sells assets continue to evolve and we aggressively keep informed of those changes in order to find ways to secure the deepest discounts. We will be in New York in mid-May for the Mortgage Banking conference in order to network and learn more.

Performance Statistics

Total Fund Annualized Return Since Inception: 20.12%