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also constantly monitor the financial position of
the general partner.
Another risk is that the EPIC property management
company will fail. If the manager is collecting
the rents and does not promptly forward all of
the rent to the general partner, the entire
enterprise is in jeopardy. Of course, this is
virtually the entire business of EPIC.
Therefore, it is highly improbable that the
property management company would fail alone.
Ultimately, we have the property to look to.
Of course, the critical question is whether or
not the property investors are acquiring the
property at a bargain price, or whether EPIC is
overcharging the investors. Presumably, this
is what our underwriting is intended to guard
against. We'll have to look at it carefully to
satisfy ourselves that the value is probably
there if we need it. However, I believe that
we should be concerned only with the entire
pool because there is no way that an individual
property will go into default–-unless the general
partner can decide to stop making payments on one
individual mortgage.
The rates may be standard, owner-occupied rates
on the primary insurance. Frank Bossle agreed to
send me copies of the current rates of the other
PMI companies. He says he is not looking for a
bargain rate, because the cost of the mortgage
insurance is passed on to the customer anyway.
He also says that they do not believe in requir-
ing an insurer to take property that the insurer
doesn't want. They like all their business
relationships to be based upon cooperation and
mutual trust and profitability.
As noted above, one of the risks that Mr. Miller identified
related to the value of the property; i.e., "whether or not
the property investors are acquiring the property at a
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