Quarterly Update - 2013 Q2

July 2013

Dear Rubicon Mortgage Fund Investor: 

Management at Rubicon Mortgage Fund, LLC (“the Fund”) is pleased to announce that through the first two quarters the Fund has returned 7.2% (assuming investors reinvested their distributions monthly).  This is up slightly from the first quarter. The Fund currently has 34 loans in its portfolio and holds two REO properties. We funded nine new loans during the first two quarters totaling approximately $4,350,000 and we received five pay offs from current borrowers. The Fund’s portfolio of loans totaling approximately $15,000,000 consists solely of first trust deeds.

Troubled Loan and REO Status Updates:

Nehalem, Oregon (NOD):
As mentioned in our last quarterly letter, the Fund made a loan in June of 2009 secured by two rental properties along the Nehalem River just off the coast south of Cannon Beach, Oregon.   We issued a notice of default earlier this year. Just prior to the foreclosure date the borrower was able to sell the property and we received all of our principal, accrued interest, late fees and default interest. Overall this loan was very profitable to the Fund.

Kings Beach Lake Tahoe (NOD):
The fund made a loan for $750,000 as part of a $3,100,000 loan on two contiguous lake front properties in October 2011. The borrower paid $500,000 in 2012 bringing the principal down to $2,600,000. RMF’s remaining balance of $630,000 came due in May 2013. When the borrower did not pay off the loan or comply with the offered extension we issued a NOD in May 2013. There is a second loan behind us for $1,100,000. The current borrower is trying to refinance the property. The second lien holder (who also has issued the borrower a NOD and whose foreclosure is schedule ahead of ours) has also contacted us requesting a loan.  We have given them a quote for a new loan. Since we value the real estate well above $4,500,000, we feel completely secure in our hard line negotiations with both parties.

Fund Growth and Outlook for 2013:

The fund has added twenty-one new investors this year so far and several existing investors added capital for a total increase of about $3,300,000. This consistent growth has allowed the fund to continue to diversify its portfolio while remaining focused on quality loans.

As we have communicated in our prior quarterly letters, interest rates and fees have dropped in all sectors of our Industry thus keeping our returns modest. However, more recently a slight rise in rates has occurred which may lead to better returns in months to come. Our loan underwriting criteria continues to focus on quality deals.  However by focusing on quality (and subsequently reducing our risk), our rate of return to investors may be lower. We believe our targeted compounded rate of return for the Fund in 2013 of 7.75% may be slightly high but we feel 7.5% may be more in line.

Please note that our best sources of referrals come from our current stable of Investors.  Please feel free to give our contact information to any interested colleagues, and as always, contact us directly with any questions.

Sincerely,

Rubicon Management