Investor Newsletter Chief Executive Officer Todd Parriott by mikeholy


									                       Chief Executive Officer, Todd Parriott, Answers Your Questions
                      In your opinion, what is the outlook on the current housing     business with resilient leadership. Consolidated Mortgage         Is now the time to invest in real estate?
                      market in Las Vegas?                                            has met these challenges by evaluating each situation and
                                                                                      responding in the best interest of our investors.                 In my opinion, yes, and I will explain my reasoning.
                      Due to the thrust in economic development in Las Vegas,
                      I would anticipate that in the near future the new and          What are the effects of the subprime market on trust              First, regarding trust deeds offered by Consolidated

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                      existing homes available on the market will not meet the        deeds?                                                            Mortgage: All new loans are underwritten according to
                      demand of the growth. The gaming industry alone has $15                                                                           current market conditions. We obtain updated appraisals so
                      to $20 billion in new projects (CityCenter, Palazzo, Encore,    Our borrowers will feel the greatest impact of the changing       we are assured that values are based on current conditions
                      Echelon Place and Alliante Station, just to name a few)         lending environment because fewer buyers meet current             and do not assume any appreciation. We evaluate the
                      underway or planned to open by 2012.                            lending requirements, and subsequently sales rates have           borrower’s exit strategy based on current sales paces and the
                                                                                      stalled. This impacts Consolidated Mortgage’s loan                takeout lending environment, with the assumption that these
                      Deutsche Bank Securities estimates this explosive growth        portfolio in that more time is needed for borrowers to sell       variables do not improve. Finally, we only approve loans
                      in the gaming/hospitality industry will create more than        existing homes and pay off construction loans, and land/          that fulfill the criterion that we would be willing to own the
                      100,000 jobs in Las Vegas. So it should be no surprise that     development loans will last longer until the project warrants     property in the event of borrower default. Ultimately a loan
                      Nevada continues to lead the nation in job growth. This,        the next phase of development.                                    must fulfill this measurement for an exit strategy.
                      paired with 6,000 net new residents moving into Clark
                      County (Las Vegas, North Las Vegas, Henderson and               Fortunately, Consolidated Mortgage can quickly react to           Second, regarding real estate in general: A U.S. Census
                      Mesquite) each month, creates additional infrastructure         changes in market conditions to fulfill demand according           Bureau data report released in December 2006 focused
                      requirements to support the economic demand.                    to current absorption rates. We have modified the pace at          on the geographic growth in the United States from July
                                                                                      which we fund sets of construction loans, using updated           2005 to July 2006 and confirms that states with the biggest
                      Has Consolidated Mortgage modified its current business          appraised values. In anticipation of the changing market          population gains during that period by percentage change
                      strategy in response to market conditions? And what             conditions, we adjusted our portfolio to include more             was Arizona with 3.6 percent, Nevada with 3.5 percent,
                      experience does Consolidated Mortgage have, if any, with        commercial loans, a sector showing relative strength, to          Idaho with 2.6 percent, and Georgia and Texas tied with 2.5
                      the downward slope of market conditions?                        create an even stronger blend of projects available for our       percent. The overall growth leader was the West followed
                                                                                      investors.                                                        by the South. The population migration pattern also shows
                      As the subprime mortgage situation began to unfold,                                                                               that Californians are moving to Arizona and Nevada at a
I n v e s t o r

                      Consolidated Mortgage focused on three objectives:              Overall we are confident that lending conditions will              record pace. Clearly the growth patterns remain focused on
                      1) examine the extent to which the subprime mortgage            stabilize; the industry has been making strong adjustments        the southwestern region of the United States.
                      implosion would impact projects under management; 2)            and many analysts report that this normalization period was
                      apply that information to our borrowers who would be            long overdue. In the mean time, we will react strategically       This information shows that demand for real estate in these
                      affected by the circumstances and identify the best means       in order to offer investors the most desirable loans available    areas will continue to grow. For instance, four years ago
                      to assist them; and 3) focus on loan performance to continue    under these changing conditions.                                  the Bureau of Land Management (BLM) in Nevada listed
                      providing our investors with high-yield monthly payments.                                                                         raw land per acre for less than $100,000. The BLM is now
                                                                                      What impact has other trust deed companies closing their          receiving as much as $600,000 per acre for equivalent raw
                      Additionally, changing market conditions have created           doors had on CM?                                                  land. The demand for land continues to grow and the time to
                      unforeseeable delays for many of our borrowers. While they                                                                        invest in real estate in the Southwest remains ideal.
                      are committed to seeing their projects to completion, they      While the malfeasance of other companies has not affected
                      have been forced to adjust sales projections and lengthen       the way Consolidated Mortgage conducts business, those
                      their development phases. Investors should expect a period      companies that mismanaged investors’ funds have tarnished
                      in which borrowers will use their full loan terms, and even     the reputation and investor trust in the industry. Consolidated
                      request extensions, as it takes them longer to sell projects.   Mortgage must combat assumptions and reestablish trust
                                                                                      with investors who are now wary about industry integrity.
                      With that being said, throughout our three decades in           Our primary message is that we have been operating since
                      business we have faced various challenges including             1977 with honesty, integrity and attention to detail. We
                      political, economic and social issues that have had an impact   maintain open communication with our clients and have                     Newsletter continues on
                      on market conditions. We have been able to manage these         always been up-front when faced with an issue involving
                      issues strategically, while understanding and steering our      a loan.                                                                               next page...
 Action Taken Against Borrowers in Default                                                                                        Terminology                                                      INVEST YOUR IRA
Consolidated Mortgage, LLC underwrites loans to qualified         with the borrower to bring payments current, or have the        Debtor – The entity filing for bankruptcy protection.
                                                                                                                                                                                                   IN REAL ESTATE
borrowers and guarantors based on borrower equity and/or         borrower payoff the loan.                                                                                                         Experience the difference with Preferred Trust.
                                                                                                                                 Deed of Trust – A security agreement creating a lien on real
collateral, project viability, borrower track record and the                                                                     property. The lein is collateral for the lender in the event of
intended repayment strategy.                                                                                                                                                                       Consolidated Mortgage is working with this preferred
                                                                 In some instances, a borrower may file for bankruptcy            a borrower defaulting on the promissory note.
                                                                                                                                                                                                   IRA custodian vendor to enhance our customer service
                                                                 protection. A borrower may take this step in order to prevent   Forbearance – A postponement of foreclosure of the lender         capabilities for investors who invest their IRA in Trust
The loan-specific documentation provided to investors upon        an imminent foreclosure or to delay collection efforts while    in which the lender and borrower have established a new           Deeds now and in the future.
their selection of a loan provides full disclosure regarding     they attempt to reorganize or liquidate their assets. In this   agreement to make a loan current and/or payoff a loan.
the terms of the loan and risks associated with investing        scenario, Consolidated Mortgage will file a lift stay motion                                                                                      The    advantages     investors    will
in trust deeds. Investors record as beneficiaries of a Deed       with the Court to request the subject property be released      Foreclosure – The process by which an owner’s right to a
                                                                                                                                 property is transferred to the lender due to loan default.                         experience with Preferred Trust
of Trust on the property, which is further secured by Title      from bankruptcy protection, thereby allowing Consolidated                                                                                           include 24-hour web access to IRA
Insurance and a Promissory Note. The Power of Attorney           Mortgage to foreclose. Depending upon various issues            Lift Stay – A request from a secured creditor to the                                 account holdings and transactions
allows Consolidated Mortgage to act on behalf of investors       concerning the property and the debtor the Court may,           bankruptcy court to release the property from bankruptcy to                          viewable by you and your
during the maintenance and/or collections processes of the       or may not, grant the lift stay. Inevitably, a workout plan     commence foreclosure.                                                                Investment Representative (should
given loan.                                                      will be determined by the Court whereby investors will be                                                                                             you choose), the flexibility to roll
                                                                                                                                 Notice of Default – A formal notice to a borrower
                                                                 paid off through the Court-approved actions of the debtor,                                                                                            over on loan rewrites, and a fee
                                                                                                                                 declaring that a default has occurred and foreclosure has
                                                                 or through the Court allowing Consolidated Mortgage to                                                                                                 structure that does not deduct a
While we do not anticipate a borrower being unable to make                                                                       commenced.
                                                                 foreclose and proceed with the sale of the property.                                                                                                    portion of your payments.
a payment, we are proactive in taking the necessary steps to                                                                     Power of Attorney – This document allows an agent to act
protect our investors’ capital. Initially we will contact the                                                                    on behalf of an investor for a specific loan.
borrower to determine the ability to make payments and/          Default situations are inevitable in the lending environment                                                                                              Clients of Preferred Trust will
or continue with the project. In general, the most ideal         we operate in, particularly during market changes, however      Promissory Note – A document signed by a borrower                                         also take advantage of the ease
scenario for investors is one in which the borrower executes     Consolidated Mortgage is committed to attaining the best        promising to repay a loan under the agreed upon terms.                                    and convenience of on-line
the original plan for the property, realizes the property’s      possible resolution on behalf of investors. Over the last                                                                                                  forms, competitive annual
                                                                                                                                 Title Insurance – Insurance to protect the interest of any
value potential and generates a payoff. With this in mind,       30 years we have worked very hard in different market                                                                                                      fees, and the flexibility
                                                                                                                                 adverse title claim.
we prefer to first work with the borrower to avoid a potential    conditions to earn a favorable reputation in our industry,                                                                                                  to select non-traditional
default situation in which interest payments and payoff are      and we are confident that investors will benefit from our                                                                                                     investments to complement
not made for several months and present additional risk for      experience, resources and ability to take action on behalf                                                                                                  their investment portfolio.
investors through the ownership of the property which may        of investors.
be in various stages of development.

While working with the borrower we will determine
                                                                   As Consolidated Mortgage has grown and
reasonable conditions to be met on behalf of investors,
such as deadlines for payments or other documentation
                                                                   changed over the past 30 years, so has our logo.
                                                                                                                                                                                                                       2450 St. Rose Parkway, Suite 210
supporting a delay. Should these conditions not be met,            Take a look at the progression of our logo, from its earliest inception, on the left,                                                                          Henderson, NV 89074
Consolidated Mortgage may file a Notice of Default on
behalf of investors. The Notice of Default serves three
                                                                   to the current version, on the right.                                                                                                                           Phone: 702.990.7892
purposes: initiates the foreclosure timeline, protects the
                                                                                                                                                                                                                                     Fax: 702.946.0316

asset and puts the borrower on notice.

Foreclosure timeframes vary by state, but in Nevada a
foreclosure cannot exceed 120 days. During this time
Consolidated Mortgage will continue to work for a                                            Mortgage                Consolidated Mortgage   Your Investment Home
resolution that is in the best interest of the investors. This                               Your Investment Home

may include agreeing to a forbearance plan that works
                        Consolidated Mortgage Announcement                                                                                                BUYING OR
                      Consolidated Mortgage, LLC announced the appointment
                      of Paul Huygens as its President on September 5, 2007.
                                                                                       Corporation and High Country Investments.                       REFINANCING?
                      As President, Paul Huygens will oversee loan originations,       Mr. Huygens has a Bachelors of Science in Business
                      portfolio management, daily operations and long-term             Administration from Santa Clara University and is a member

N e w s l e t t e r
                      strategic planning of the real estate investment company.        of the American Institute of Certified Public Accountants
                                                                                       and Nevada Society of Certified Public Accountants.
                      Todd Parriott will continue to provide senior leadership for
                      the company, which has become one of the largest private         “With 30 years of continued investment success,
                      trust deed investment firms in the United States under his        Consolidated Mortgage still remains in its early growth        At Residential Capital Mortgage Corporation our success
                      management.                                                      stage; Paul takes the helm with a wealth of possibilities      is derived from an industry leading team of mortgage
                                                                                       before him,” said Mr. Parriott. “The company is poised for     professionals. As a banker and broker, Residential Capital
                                                                                                                                                      is sure to offer the widest array of home loan options in
                      Formerly of Rhodes Homes, Mr. Huygens served as                  further development and Paul’s leadership skills, industry     the industry.
                      Corporate Chief Financial Officer responsible for: all            knowledge and breadth of experience will serve him and
                      areas of accounting; treasury and finance including cash          everyone associated with Consolidated Mortgage well. I         Whether refinancing or buying a home, experience
                      management, sourcing and closing debt transactions,              have full confidence in Paul’s capabilities and look forward    the difference with the on-site controls of processing,
                      managing equity partner relationships and maintaining the        to working with him.”                                          document preparation and funding to make your financing
                                                                                                                                                      experience a beneficial one.
                      accounting records and reporting for all Rhodes Entities;
                      overseeing the planning and preparation of tax returns; and                                                                     As an affiliated company of Consolidated Mortgage,
                      monitoring corporate and subsidiary performance. He also                                                                        Residential Capital is offering a Preferred Investor
                      directly oversaw the areas of escrow, financial analysis,
                      and golf course and trade subsidiary performance, and                We are proud to announce                                   Program to all Consolidated Mortgage investors and
                                                                                                                                                      their family members. Take advantage of a $1,000 credit

                                                                                            that in October 2007,
                                                                                                                                                      towards closing costs on your purchase or refinance with a
                      was integrally involved in major business decisions and                                                                         guarantee that your loan will close on-time or we will pay
                      corporate strategy.                                                                                                             you $100 per day until the loan closes!

I n v e s t o r

                      “My career spent in real estate and finance has more than                                                                        Contact a Mortgage Consultant at 866.795.7558 and ask
                      prepared me for this new role and exciting challenge in                                                                         for the Preferred Investor Program.

                      leading Consolidated Mortgage,” said Mr. Huygens. “The
                      industry is currently undergoing rapid changes and there is
                      tremendous opportunity to make further inroads in the trust
                      deed investment market.”
                                                                                                       will celebrate

                                                                                                  30 years                                               Preferred Investor
                      Prior to joining Rhodes Homes, Mr. Huygens was a manager
                      of assurance and advisory services at Deloitte & Touche
                      LLP. His duties included coordinating the firm’s efforts
                      on numerous financial transactions including initial public                                                                              Program
                      offerings, public and private debt offerings, and purchase
                      and merger transactions. He also performed and oversaw                of providing investors an                                      $1,000 credit towards closing costs on a
                                                                                                                                                         purchase or refinance with a guarantee that
                      audits on public and private clients in a wide range of
                      industries, with a specialization in real estate, construction
                                                                                             opportunity to achieve                                      your loan will close on-time or we will pay
                      and gaming.                                                           their growth and income                                         you $100 a day until the loan closes!

                      Before working for Deloitte & Touche, Mr. Huygens                         objectives through                                   Offer is only valid in NV, AZ, CA, UT, CO, WY and MO with a minimum loan
                                                                                                                                                     amount of $75,000. Offer is not available on any type of home equity loan. The
                      accumulated several years of experience in the land
                      development and construction industries with Del Webb
                                                                                            investment in real estate.                               $1,000 can only be credited toward your closing cost upon successful close of
                                                                                                                                                     escrow with Residential Capital Mortgage Corporation • 1291 Galleria Drive,
                                                                                                                                                     Suite 230, Henderson, NV 89014 • 702.739.9053
1291 Galleria Drive, Suite 220
   Henderson, NV 89014
      P: 702.739.9090
         MLD #284

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