Why we invested: Blackstar Stability
We’re proud to announce The Ownership Fund’s investment in the Blackstar Stability Distressed Debt Fund (“Blackstar”). Making home ownership more accessible is a key part of The Ownership Fund’s investment thesis, and we believe Blackstar’s approach and excellent management team will prove out an important and scalable new model.
Blackstar is rebuilding the pathway to wealth through home ownership, a key driver of wealth creation for low- and middle-income families. Blackstar primarily serves lower-income families, often minorities, by addressing predatory lending practices that have taken advantage of communities underserved by traditional mortgage lenders. Blackstar acquires pools of single-family home debt products, such as contracts for deed (“CFDs”), lease to own contracts (“LTOs”) and nonperforming loans (“NPLs”), and works with families to convert the underlying loans into a traditional mortgage, or other more equitable financing arrangements. These mortgages not only provide better loan terms, but also ensure that families own the homes they’re making payments towards.
Blackstar’s intervention seeks to undo the decades of harm done by redlining and the financial crisis. The prevalence of CFDs and other similar products are historically rooted in redlining, which resulted in the systematic exclusion of many American communities from the mortgage market. These were almost entirely low income and minority communities. When the financial crisis hit, lower-income communities were once again affected as homes in these communities were purchased for cents on the dollar by large asset managers. These asset managers then sometimes sold homes using predatory contracts such as CFDs, and some continue to hold those loans today with limited interest in the conditions of the underlying properties.
Typically, purchasing pools of single-family assets that are potentially subjected to predatory debt products has been the exclusive territory of large investment firms, but Blackstar brings a unique combination of scale, sophistication, and impact to address some of the issues preventing families from accessing equitable home financing alternatives. While Blackstar’s targeted US$100MM fund won’t address all predatory lending and foreclosure risk faced by families in this market right away, it is large enough to become a leading acquirer of loan pools and drive impact at scale. Blackstar’s team has the experience and commitment toward impact that’s required to unlock investment opportunities, make sound investment decisions, and complete the painstaking work of loan origination/restructuring in a way that benefits families.
Home ownership has been the primary pathway to wealth for middle class families, but that hasn’t been true for families in redlined communities within the United States. Blackstar is setting out to fix this and the predatory lending that has harmed these families. While this is just the beginning of Blackstar’s journey, we’re excited to be a supporter as they tackle these important and complex challenges. If you’re interested in learning more, or investing in Blackstar, please don’t hesitate to reach out.
The Ownership Fund’s investment in Blackstar was led by Taylor Sekhon and Ian MacDonald. They wrote this note.
