3.3.4. Mortgage Programs
A mortgage loan program is a type of real estate syndication that does not purchase real estate but invests in residential and commercial real estate mortgages. It may finance new mortgage loans, or it may invest in existing mortgages by acquiring mortgage-backed securities. A general partner organizes and manages the operation, while a group of limited partners provides the bulk of the capital, which is used to leverage the mortgage loans. The partnership pays interest to the banks that originally held the mortgages and receives a fixed interest rate in return. The program earns its return on the interest spread, the difference between the interest earned from the mortgage holder and the interest the program pays its own lender to leverage the mortgage purchases.
In addition, the mortgage program may negotiate a percentage of any rent increases over the term of the loan, in the case of commercial
