Non-Performing Opportunity Loan Fund
Returns & Management fees
Target net annual return 17% - 20%
Target equity multiple 1.60 - 1.72
Preferred Return 8.00%
Inv share in excess profits 50.00%
Annual management fee 1.00%
Schedule & Structure
Payment schedule Event based
Target term 36 months
Tax document K-1
Offering structure Limited Partnership
Annual flat expense .50%
Overview
The Housing Group Recovery Fund II (HGRF II) offers a unique opportunity to invest in two
high-potential, complementary mortgage asset classes:
Legacy junior mortgages- Thousands of junior mortgages bundled in Residential Mortgage Backed Security Bonds (RMBS) from 2004 - 2007, are now trading at deep discounts in the secondary market.
Defaulted Reverse Mortgages- Defaulted Home Equity Convertion Mortgages (HECM), commonly reffered to as Reverse Mortgages owned by the Department of Housing and Urban Development (HUD) are currently bundled and sold annually in large loan pools offering an an attrative risk / return investment.
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Discount acquisition price: The Fund’s investment strategy focuses on investing in junior non-performing mortgages, which trade at a 50% discount or greater and defaulted reverse mortgages trade at a 20% discount or greater below usually below 70% loan to value.
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Diversification: Combining these two opportunities enhances both risk-adjusted return and deployment scale: Non-performing junior mortgages deliver superior yields but are time-consuming and limited in supply and the Defaulted Reverse Mortgages are scalable and more predictable, with straightforward first-lien foreclosure strategies.
Investment details
Premise
What am I investing in?
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An opportunistic mortgage debt fund to systematically acquire and aggregate non-performing mortgage pools that are trading at discounted rates on the secondary market.
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Housing Group Recovery Fund II is buying legacy non-performing junior mortgage and defaulted reverse mortgage pools using an active investment strategy.
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The mortgages have very favorable collateral characteristics like 65% loan to value and performing senior mortgages (for junior loans).
Investment strategy
What is the value proposition?
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Housing Group Recovery Fund II (the “Fund”) is managed by HGF Management Company (“HGF”) with a total fund size of ~$10.0M, expected to be funded over 3-6 months in multiple tranches.
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The Fund is an evergreen fund with redemption windows every 36 months, with the initial redemption window occurring in the Summer of 2028.
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During the Fund’s term, HGF will implement an active investment strategy of foreclosure enforcement, loan modifications, refinances and selling back mortgages into the secondary market as a re-performing loan portfolio.
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While all of the assumptions used in the investment model contemplate an unlevered structure, Housing Group Recovery Fund II may, in the future, seek leverage to potentially enhance returns for investors.
Behind the investment
Who is the sponsor?
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HGF Management Company has the expertise, capabilities, network and track record to execute upon its opportunistic mortgage investment strategy.
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Corporate overview: HGF Management Company (HGF) manages loans from acquisition to disposition with an emphasis on the recovery of non-performing loans. In 2019 the HGF team began managing loan portfolios for outside investors and currently manages $35 million of loans with a concentration in California, Florida and Texas. The company now employs a dedicated team of over 7 in-house professionals.
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Strategic operation: HGF's office is situated in Granite Bay, California. HGF is the loan servicer of 90% of mortgages and internally operates foreclosures in California and Texas.
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Partnerships: Fund administration is performed by High Divide Management led by Jack O'Flaherty who provides an outside independent quarterly audit-level report on fund performance. Foreclosures outside of California and Texas are performed by 8 different vetted law firms and bankruptcies are performed by 4 vetted law firms.
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Operational excellence: HGF delivered an annual 28.69% compounded rate of return from 2019 - 2024 in a previous fund which invested in the same loan asset class that Housing Group Recovery Fund II is investing in; demonstrating HGF's capability to execute this mortgage investment strategy.
Market backdrop
What are some of the reasons why you should consider the investment?
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Over the course of 2012 - 25, the run-up in property values and the reduction of senior loan balances has resulted in significant equity which provides a large margin of safety.
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The forgotten loans held in these legacy Residential Mortgage Backed Security Bonds represents a special situational opportunity to gain access to non-performing mortgages at an extremely attractive price with a low risk profile.
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Approved to purchase Defaulted Reverse Mortgages owned by the Department of Housing and Urban Development (HUD) at a discount.
Essentials
Please refer to the Private Placement document for more details about this offering.
Cash flow
How do I get paid?
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As non-performing mortgages are modified and begin paying or when mortgages payoff income will be generated. After fund expenses, as further described in the Private Placement document are deducted, the remaining income will be distributed to investors to pay the preferred return.
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The majority of returns are expected to be achieved via appreciation at time of modification and then a refinance or sale of the underlying mortgages in the fund, which is anticipated to begin the second quarter of 2026.
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Every 3 years beginning in the Summer of 2028, a redemption window to withdraw or to invest capital is available. Please refer to the Private Placement Memorandum for more information.
Subscription process
When will my investment be made active?
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The Fund will conduct monthly closings on the first business day of each month, from June 2025 - December 2025.
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Wire transfers: Follow the wire instructions specific to this investment, which will be emailed.
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The Fund will confirm all the fund documentation has been signed and received.
Accessibility
Who can invest?
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This offering is available to accredited investors.
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This investment is available to retirement accounts limited to 25% of the Fund size.
Post investment
What to expect after you invest in the Fund?
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Quarterly investment updates prepared by High Divide Management.
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Investors should expect to receive a K-1 tax document for this investment. K-1s will be made available between February and March of the following tax year.
This offering page describes only certain aspects of the offering ("Offering") of the securities issued by Housing Group Recovery Fund II LP ("Fund"). The Offering is made only by means of the Private Placement document relating to the Offering. The information on this offering page is a summary of the Offering, does not purport to be complete and should not be considered a part of the Private Placement document and the amended limited partnership agreement, or as incorporated in the Private Placement document and the amended limited partnership agreement by reference or as forming the basis of the Offering. No person has been authorized to give any information or to make any representations other than those contained in the Private Placement document and the amended limited partnership agreement or in any marketing or sales literature issued by the Fund or HGF Management Company, and referred to in the Private Placement document and the amended limited partnership agreement , and, if given or made, such information or representations must not be relied upon. All investors must read the Private Placement document and the amended limited partnership agreement in its entirety prior to investing in the securities.
Investing in private markets and alternatives, such as this offering, is speculative and involves a risk of loss, and those investors who cannot afford to lose their entire investment should not invest. Returns are not guaranteed.
"Annual interest," "Annualized Return", "Annual Flat expense" or "Target Returns" represents a projected annual target rate of interest, a projected annualized target return, or a projected annual flat expenses actually obtained by fund investors. Unless otherwise specified on the fund's offering page, target interest or returns are based on an analysis performed by HGF Management Company of the potential inflows and outflows related to the transactions in which the strategy or fund has engaged and/or is anticipated to engage in over the estimated term of the fund. There is no guarantee that targeted interest or returns will be realized or achieved or that an investment will be successful. Actual performance may deviate from these expectations materially, including due to market or economic factors, portfolio management decisions, modeling error, or other reasons.