When discussing trust deed investing with new investors, the subject of sole ownership versus fractional ownership invariably comes up. Generally, investors think they are more protected if they hold 100% ownership of the note and deed of trust, with no other investors involved. Because this assumption is encountered frequently, a list has been created of considerations which may broaden your thinking.

FRACTIONAL NOTE PURCHASE

1. Allows for greater diversification by placing capital designated for trust deed investments into many different trust deeds representing different locations and product types, thereby diversifying the risk.

   Question: Would it be more advisable to hold a single $500,000 interest in one trust deed as sole owner or hold interest in ten (10) trust deed investments of $50,000 each, joined with others in trust deed ownership?

   Suggestion: Sundance Investments considers it more prudent for an investor to spread their risk by holding joint ownership in many different trust deeds.

2. Because Sundance Investments coordinates multiple investors in fractionalized loan investments, the overall availability of good quality first trust deeds rises significantly with our ability to fund larger loans. Better quality translates into more consistent monthly payments for the investors.

3. When we group 10 or fewer investors in a trust deed investment, we are governed by statute Section 10229 of the Business and Professions Code (B&P Code). Each investor receives certified copies of the original promissory note and deed of trust along with copies of the title insurance policy and fire insurance endorsement. Sundance Investments, Inc. retains the originals for safekeeping. Our responsibilities regarding Fractional Trust Deed Investments are clearly defined in this code. Our additional responsibilities are set forth in our written Loan Servicing Agreement. The following are highlights of the code Section:
   1. The mortgage broker must notify the Department of Real Estate of their intent to offer Fractional Interest Notes.

   2. A Fractional Interest Note and Deed of Trust is held as an undivided interest with the investors named as beneficiaries on the Note, Trust Deed and Title Insurance Policy.

   3. No more than 10 persons who meet the criteria of income or net worth may be fractionalized in a transaction.

   4. Qualifying questions are either:
      1. My investment in the transaction does not exceed 10% of my net worth, exclusive of home, furnishings and automobiles, or

      2. My investment in the transaction does not exceed 10% of my adjusted gross income for federal income tax purposes for my last tax year, or in the alternative, as estimated for the current year.

   5. Regardless of the investment amount, the purchasers (investors) shall have identical rights to:
      1. Direct or require a foreclosure

      2. Rate of interest

      3. Interest earned shall be prorated to the investor's percentage of fractionalized ownership interest.

      4. In the event of default by the borrower, the note holders (investors) totaling more than 50% of the recorded beneficial interest can make decisions consistent with protecting the interest of all investors (as per Civil Code 2941.9).

   6. The loan to value ratio based on current market value at the time the loan is made shall be fixed by statute not to exceed:

      1.	Single-family residence, owner occupied	80%
      2.	Single-family residence, non owner occupied	75%
      3.	Commercial and income producing properties	65%
      4.	Land which has been zoned for (and if required, approved for subdivision as) commercial or residential development	50%
      5.	Other real property	35%

   7. A copy of the independent appraisal or the broker's written evaluation of the property value be delivered to each purchaser.

4. Code requires that the agent (Sundance Investments) distribute proceeds from a loan payoff to all fractionalized investors within 25 days of receipt of payoff. Sundance Investments distributes proceeds the first business day after receipt.

5. Fractional Interests are always sold subject to a written Loan Servicing Agreement that obligates Sundance Investments to act as the agent for the investors during the duration of the transaction from initial funding to final payoff of investors.

   As a practical matter, Sundance Investments has been servicing loans for 25 years. There has never been an instance where our guidance, counsel and efforts through the foreclosure process was denied by the investors.

   Please check our web site for a copy of the Business & Professions Code 10229 (Fractional Notes), and the Civil Code 2941.9 (Agreement of Beneficiaries to Trust Deed).

   Sundance Investments hopes this information proves helpful in understanding various benefits of fractional trust deed investments. We look forward to working with you on your future trust deed related investments.