Description of Lm Funding America Inc's Business Segments
Lm Funding America Inc. operates within the niche of providing financial solutions specifically tailored to homeowners’ associations (HOAs) and community associations. The company’s offerings consist of unique products and services designed to address the challenges these associations face regarding delinquent assessments and financial stability.
Original Product
The cornerstone of Lm Fundings service portfolio is their original product, which capitalizes on specific Florida statutory provisions governing associations. This product leverages Section 718.116 of the Florida Statutes, which establishes a shared liability on the part of unit purchasers and sellers for all past due assessments owed to an association. This legal framework serves as a strong foundation for Lm Funding’s investment strategy.
Key Features: - Super Lien: The statute confers a super lienstatus to associations, which gives their debts priority over other lien types, with the exception of property tax liens. This means that the association’s claim for past-due assessments takes precedence over most other claims, providing a protective layer for Lm Funding’s investments. - Investment Structure: Lm Funding pays associations amounts up to the Super Lien Amount (capped at either twelve months of past due assessments or 1% of the original mortgage amount) for the rights to collect all interest and late fees related to accounts purchased from the associations. This model ensures that they can recuperate their invested amount while aiding the associations in managing delinquent accounts. - Risk Mitigation: Traditionally, Lm Funding employed insurance from AmTrust North America to shield against losses exceeding the Super Lien Amount due to mortgage foreclosures. However, as of January 28, 2016, AmTrust ceased offering this insurance, which previously served as a safeguard for Lm Fundings investments that exceeded the super lien threshold.
New Neighbor Guaranty
In 2012, Lm Funding launched the New Neighbor Guaranty, expanding its product line to create additional value for community associations. Under this program, associations assign their delinquent accounts to Lm Funding in exchange for guaranteed ongoing payments equivalent to regular assessments for those accounts.
Key Features: - Debt Elimination: By transferring the obligation of collection for delinquent accounts to Lm Funding, associations are able to clear their balance sheets of bad debts. - Cash Flow Assurance: This product allows associations to maintain a reliable cash flow, as Lm Funding guarantees payments, thus aiding in budget management. - No Collection Costs: The program relieves associations from the burden of legal fees and other costs associated with debt collection, which can often be substantial. - Payment Model: After evaluating the associations accounts receivable, Lm Funding commits to making scheduled payments to the association while assuming the collection responsibilities. The terms typically allow Lm Funding to retain all collections from the delinquent accounts, save for special and accelerated assessment balances.
In the fiscal year of 2015, this product represented approximately 5% of Lm Fundings overall revenue, in contrast to the original product’s dominant share of around 93%.
Future Products
Lm Funding is currently exploring several innovative product variations aimed at expanding its market reach and providing additional financial solutions to associations.
- Lender-Requested Structures: One potential new product involves establishing a revenue guarantee that allows associations to maintain a specified percentage of budgeted revenues (e.g. 90%). In instances where associations fall short, Lm Funding would provide upfront capital to elevate revenue levels to meet lender expectations and ensure financial stability. This capability not only lessens the risk of delinquency impacting loan repayments but also broadens the range of associations that lenders can support under their existing guidelines.
Future offerings aim to enhance financial stability for associations while globalizing Lm Fundings operational footprint, depending on the successful execution and funding of such product variations.
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