Common use of Credit Evaluations Clause in Contracts

Credit Evaluations. The General Partners may consider the income level and general creditworthiness of a borrower to determine his ability to repay the Mortgage Investment according to its terms, but such considerations are subordinate to a determination that a borrower has sufficient equity in the security property to satisfy the loan-to-value ratios described above. Therefore, Mortgage Investments may be made to borrowers who are in default under other of their obligations (e.g., to consolidate their debts) or who do not have sources of income that would be sufficient to qualify for loans from other lenders such as banks or savings and loan associations. Loan Brokerage Commissions. Redwood Mortgage, an affiliate of the General Partners, will receive Loan Brokerage Commissions for services rendered in connection with the review, selection, evaluation, negotiation and extension of the Mortgage Investments from borrowers. Redwood Mortgage anticipates that Loan Brokerage Commissions will average approximately three to six percent (3-6%) of the principal amount of each Mortgage Investment, but may be higher or lower depending upon market conditions. The Loan Brokerage Commission will be limited to four percent (4%) per annum of the Partnership's total assets. The Loan Brokerage Commissions will be paid by the borrower through the title company or escrow agent at the close of escrow. Loan Servicing. It is anticipated that all Mortgage Investments will be "serviced" (i.e., loan payments will be collected) by Redwood Mortgage, an affiliate of the General Partners which will also act as a loan broker in the initial placement of Mortgage Investments. Redwood Mortgage will be compensated for such loan servicing activities (See "COMPENSATION TO GENERAL PARTNERS AND AFFILIATES"). Both Redwood Mortgage and the Partnership have the right to cancel this servicing agreement and any other continuing business relationships that may exist between them upon 30 days notice. Borrowers will make interest payments in arrears, i.e., with respect to the preceding 30-day period, and will make their checks payable to Redwood Mortgage. Checks will be deposited in Redwood Mortgage's trust account, and, after checks have cleared, funds will be transferred to the Partnership's bank or money market account.