Korth Direct Mortgage Inc.

Korth Direct Mortgage Inc

Overview

Korth Direct Mortgage Inc (KDM) originates and funds loans secured by commercial real estate (CM Loans). It holds CM Loans directly or through its wholly owned subsidiary, KDM Funding I, LLC, and serves as loan servicer (with potential use of sub-servicers). KDM funds CM Loans through Mortgage Secured Notes (MSNs), direct participations, warehouse lines, securitizations, or other capital market structures. An asset management segment handles properties acquired through foreclosure or deed in lieu (REO) until disposition. KDM targets higher-quality commercial real estate borrowers and positions itself between traditional banks and hard money lenders in the “Middle-Money” niche, with primary lending focused on multi-family value-add bridge loans and other income-producing commercial properties.

Products and funding channels

• CM Loans: secured by properties owned by single-purpose borrower entities; funding sources include MSNs, warehouse lines, or other financing arrangements.
• Mortgage Secured Notes (MSNs): senior obligations of KDM payable from CM Loan proceeds (net of servicing costs) and secured by KDM’s interest in the underlying CM Loan. Targeted servicing fee for MSNs is 1.00%.
• Participations and notes: senior and subordinated notes and loan participations are offered alongside MSNs or separately.
• Funding paths: direct KDM funding, issuance of MSNs to investors, warehouse lines, or combinations; proceeds used to fund CM Loans or for repurchases.
• DTC and trust structure: notes issued in connection with MSNs are delivered to DTC and held in segregated accounts under a Trust Indenture with a Trustee for CM Investors.
• Cash management: CM Loan payments and servicing cash flows are collected into segregated accounts (omnibus account and separate accounts for taxes/insurance) and disbursed to CM Investors.

Servicing and fees

• KDM services the CM Loans it originates and may engage third-party servicers as needed.
• Servicing Fee: targeted at 1.00% for MSNs; actual servicing fees vary by loan and are disclosed in each CM Investment’s offering materials.
• 2025 metric: average Servicing Fee collected was 1.031%.
• Servicing activities: payment collection, escrow/tax/insurance management, draw processing, lease reviews, and asset management.
• Fee arrangements: fees may be shared with third parties or retained by KDM depending on loan terms.
• Delinquency and collection: when a CM Loan is past due, KDM may pursue collection and incur attorney fees that are charged against the CM Loan, which reduces net payments to Noteholders. Prepayments affect remaining term and interest accrual and can reduce interest payments to CM Investors.

Portfolio and assets

• CM Loans are the core asset class; CM Investors’ payments are payable from CM Loan performance.
• Asset Management: an internal department manages REO assets and related special-purpose entities; KDM may own REO properties directly or through affiliated REO entities.
• REO holdings: as of the report date, KDM owned four REO properties.
• Delinquencies and foreclosures (2025): four CM Loans entered or were in delinquent/default status; one REO property was returned to the ground owner; KDM foreclosed on or took deeds in lieu on two additional loans (now part of REO); two more loans were in foreclosure as of the report date.
• Asset disposition timelines vary from months to years depending on market conditions.

Corporate structure and subsidiaries

• Parent: Korth Direct Mortgage Inc, a Florida corporation (Florida Mortgage Lender/Servicer; NMLS License No. 1579547). Began formal operations in October 2016 and converted to a Florida corporation on June 6, 2019.
• J. W. Korth & Company Limited Partnership: FINRA/SEC-registered broker-dealer; became a wholly owned subsidiary on July 31, 2020.
• Principal consolidated subsidiaries and related entities:
  • KDM Funding I, LLC (wholly owned; issues MSNs)
  • KDM Stafford LLC (owns a building; special-purpose entity)
  • KDM Capital LLC (general partner of KDM Capital Partners, LP)
  • KDM Asset Management, LLC (owner of KDM’s REO LLCs)
  • KDM MFB LLC (Delaware LLC; wholly owned)
  • Various SPVs created for owning real estate acquired through foreclosure or deed in lieu, and for fund and asset management structures
• These entities are consolidated for financial reporting.

People, facilities, and data security

• Employees: 24 full-time employees and 5 contract/temporary workers.
• Offices: headquarters at 135 San Lorenzo Avenue, Suite 600, Coral Gables, Florida; J. W. Korth & Company maintains an office in Lansing, Michigan.
• Cybersecurity and data protection: SOC 2 Type II certification achieved in 2024 and 2025. The company maintains security controls, incident response, disaster recovery, and data privacy programs.
• Intellectual property and brand: proprietary KDM Ratings System, a trademark for “Middle-Money,” a broker network, and proprietary software integrated with CRM systems.

Customers and revenue

• Primary client groups: CM Investors (investors in MSNs and other notes) and borrowers that originate CM Loans.
• Servicing fee metric: average Servicing Fee collected was 1.031% in 2025.

Regulatory and risk highlights

• KDM is not an investment company under the Investment Company Act and relies on a Section 3(c)(5)(c) exemption.
• CM Investments are limited obligations payable from CM Loan proceeds net of servicing and are not guaranteed by federal agencies.
• Operations rely on third-party banks and software for disbursement and processing, creating potential operational risk if providers fail.
• Cybersecurity, data privacy, and regulatory compliance are ongoing focus areas; SOC 2 Type II certification supports controls.
• Risk factors include market conditions, loan defaults, foreclosure timelines, inflation, refinancing risk, property-specific risks, and broader macroeconomic factors.

Business model

KDM acts as lender, servicer, and asset manager for CM Loans backed by commercial real estate. The company raises capital through MSNs, participations, and other notes, and generates servicing and ancillary fees while managing collateral through REO and asset management. KDM focuses on a diversified portfolio of higher-quality borrowers and value-add opportunities within the Middle-Money niche.