Quest Investor

Dear Quest Investor,
As you know we have had to reduce our rate of return due to borrowers struggling with their jobs and income. The following is the update on our Quest portfolio. I am sure you have heard in the media about how the real estate market is improving. It is an amazing market I am witnessing things I have never seen before in my 30 years in the industry. Believe it or not inventory levels are at very low levels which are great for us at Quest as it is bringing property values back up. The reason inventory levels are so low is that the banks don’t want to foreclose, but we will discuss this more later in this letter. As you know property values have dropped dramatically over the past two years, it looks like now that the bottom of the market was back in March or April and today we are actually seeing buyers bidding up prices again. This is obviously excellent news for us at Quest. The buyer demand is extremely strong due to the low interest rates that the Fed had brought us.
The challenging economy has certainly made the lives of our borrowers and us at Quest more difficult. Consumers have heard thru the media about loan modifications and they obviously want one. When we receive a loan modification request we deny the request. But the word is out that if you want to get your loan modified you need to stop making your mortgage payments.
When we have a borrower that is not making their payment we address each file on a case by case basis. There are several different strategies we may employ depending on the circumstances of the file. Our first action is to contact the borrower to discuss what their circumstances are. We also contact the first trust deed holder if we are in a second position to determine the status of that loan. If the borrower is behind on the first by 60 days we begin a foreclosure regardless of their status with the Quest Loan. We cannot afford to allow the first to fall behind for several reasons including a default of the on first which would put our loan at risk. Additionally, we cannot allow the first mortgage to grow as this increases the loan to value position that we have, couple that with the reduced property values and our principal could be at risk.
Filing the notice of default has proved to be the right move. It has forced borrowers to take action as opposed to do nothing. We have found that the first trust deed lenders do not want to foreclose and will let a borrower go well over a year before pursuing foreclosure. Our NOD filings have pushed some of our borrowers to list their property for sale. Two of our loans are currently in escrow and should pay off in October. We have taken owner ship of three properties, one we just completed the eviction process and will be re-selling it; we have received a very strong interest in the property and should sell it very quickly at a gain. The others appear to be very close to break even one way or the other. After the former borrower is evicted it will be easier to determine based on condition and market demand in the area.
The good news is that our overall portfolio is in very good shape in spite of a very challenging economy. The plan is to continue to deal with each borrower and property’s circumstance individually. I anticipate that we will have some properties that we foreclose on that we will make some money and others that we will lose a little. In the event we have any loans that we are going to take a significant loss by selling the property then we will keep it in the Quest portfolio and rent the property. There is no doubt in my mind that property values will continue to rise over the next few years and we can sell then.
These are challenging times for us and candidly it hasn’t been fun; so many people are really struggling with job losses or severely reduced incomes. Yesterday we received a call from a borrower who has been a very good borrower explaining that her husband has a heart condition that will not allow him to work and informing us that going forward they will be unable to make the current payments. I will review each file in detail to determine what is the best course of action for us.
I will keep you posted as we work our way forward, if you have any questions please feel free to give me a call.

Sincerely,
Mark Prather

The credit crisis is bringing some very attractive lending opportunities

Dear Investor,

We have a lot to discuss! I would like to share my thoughts on the effects of the stimulus plan on housing, the new regulatory lending requirements in California, the economic effects to our borrowers and the navigational strategies of Quest.
Let’s start with the stimulus plan. The best part of the stimulus plan for Quest is the $8,000 first-time homebuyer tax credit. With this new incentive, more buyers are showing up at the entry-level market. Quest views this market as being able to provide security, growth and opportunity. This is why we have decided to focus our lending in this area. The first-time homebuyer is going to be coming out in need of financing which leads us into the requirements that all borrowers will need to meet.
State regulatory requirements have been significantly changed by California legislators. The primary focus of these changes is to prevent future sub-prime lending from occurring by disallowing unqualified loans. This is not an issue for Quest as we have always believed in traditional guidelines. New pricing requirements for owner-occupied residential loans will be going into place on October 1, 2009. The types of loans that are exempt from these regulations include investor-property loans, bridge or swing loans and construction loans. Quest Lending will focus only on these loans.
The credit crisis is bringing some very attractive lending opportunities. Quest has started taking advantage of these opportunities with two First Trust Deeds. The loan to value on these loans are 35%. While the rate of return is less for these loans (the rates we charged on the two loans mentioned are 10.99% and 11.99%, respectively), I believe the risk-rewards-return is terrific.
The economy, and particularly the job market, has negatively affected some of our borrowers. Some have lost their jobs and we are working to help keep them in housing, as it is not the objective of Quest to take the homes of our borrowers. We have been active in making loan modifications, in some cases lowing interest rates from 14 .99% to 12.99%. As a Quest investor, you can expect our rate of return to come down from 12% to a return of 8-10% due to these changes and to the number of First Trust Deeds that we are now making. I am sure you agree that these rates of return are still very good given the current economic climate.
Currently, I have $485,000 invested in Quest and I am adding an additional $90,000. I plan on adding more over time, but it is difficult to do that now given the losses suffered in the stock market.
In conclusion, I want to say that the future for Quest is extremely bright. We are successfully navigating the most treacherous waters that the real estate market has seen since the Great Depression! If you have any questions please feel free to call or email us at



Mark Prather
President
Quest Funding Inc.
877-957-8378
mprather@questfi.com

Networking with NIPOC

Quest was very honored to be a part of NIPOC's business networking event this Thursday, where we had an opportunity to give a brief presentation regarding the rewards of investing in Quest. NIPOC is the Network of Iranian-American Professionals of Orange County (http://www.nipoc.org/). I would like to take this moment to sincerely thank NIPOC for welcoming Quest to their mixer. It was our pleasure to speak with the members and we had a great time. Quest sincerely hopes to continue its relationship with NIPOC and be a part of many upcoming events.

I extend a warm welcome to all of the new contacts that we made on Thursday and invite you to visit our website http://www.investinquest.com/ for a comprehensive look at our mortgage fund. You can access our audited financial statements, as well as investor testimonials, a message from our CEO, and an archive of our monthly newsletters. It is a great way to become acquainted with our company and familiarize yourself with our fund.

To learn more about us, please give us a call at 877-957-8378 or email sdaniele@questfi.com to speak to one of our knowledgeable fund managers. I greatly look forward to hearing from you!

Sholeh Lajevardi

Co-Founder and Chief Financial Officer of Quest

San Francisco Money Show a success

Our time at San Francisco was highly productive, and I am pleased to announce that Quest Investments has made many valuable contacts that will enable us to further expand our family of investors. We are a great and unique investment vehicle because of our intelligent, thorough, and conservative approach. I am gratified to be able to educate investors on the superior returns that they can earn with us, and would like to take this moment to extend a warm welcome to all of our contacts from the Money Show.

I first became involved in the real estate industry in 1977. I later established Mark 1 Mortgage Corporation in 1981, which quickly flourished by becoming one of the leading mortgage services providers in Southern California. As a broker and owner of real estate and mortgage companies, every year I saw us assisting thousands of customers with various lending needs. On numerous occasions we would run into borrowers in need of a loan that traditional lenders would not approve of, although they were good and safe loans. Eventually I began to offer these loans to help our customer meet their needs and the return on these loans have been excellent. When I shared my success with my colleagues and friends, they would want to participate, but until now I was unable to allow their participation due to regulatory requirements.

I formed Quest Mortgage Fund LLC when we received our approval from the Department of Corporations to allow investors to participate in the prosperity of our mortgage fund. Our mission is to make sure that your investment is getting the treatment it deserves: maximization of return and minimization of risk.

We are currently witnessing an exciting and highly lucrative opportunity in today’s economy. The current mortgage condition has created a credit crunch, which means that subprime, Alt A and stated income mortgages have eroded. This has effectively paved the way for the rise of demand in private money loans, as well as the subsequent high returns associated with investing in them. Quest has a 30-year experienced management team that knows how to take advantage of this profitable niche in our economy.

Quest is a unique investment vehicle that mitigates the risk that is prevalent in the stock market while producing high returns. This is possible because our fund is comprised of superior real estate loans that meet our strict standards of quality. We make sure that all of our lending is backed by securities that meet our conservative criteria, which means sufficient equity in CLTV up to 60%, thorough underwriting of the borrower’s ability to make payments, and exhaustive property evaluation for collateral protection. We do appraisals and get an independent value confirmation on all properties. Our conservative approach results in high returns that do not compromise stability or safety. Investing with us is also an excellent way to diversify your investment portfolio.

The fund continues to grow and we are always bringing in more investors as word spreads about our exceptional returns. Visit InvestinQuest.com for a comprehensive, one-stop resource that contains all the information pertaining to Quest. Please take a moment to read through the testimonials written by our current investors expressing their satisfaction with the Quest experience. Accompanying their testimonials is contact information so that you can access honest feedback about their experience. This is one of the qualities that set Quest apart from lesser investment vehicles. One of our highest priorities is making sure our investors remain fully involved in every aspect of how their money is being managed, for this in turn results in satisfied and informed investors. We value openness and transparency when it comes to our financial process, because all of our lending methods are backed with our utmost confidence.

It should go without saying that Quest heartily welcomes your questions and concerns, because we are a company that greatly values customer satisfaction. By investing with Quest, you too can enjoy the abnormally high rates that our current investors are enjoying.

Mark Prather

Founder and CEO of Quest

877-957-8378

http://www.investinquest.com/

Thank you to all of our new contacts from the SF Money Show!

I would like to extend a sincere thank you to all of our new contacts from the San Francisco Money Show! It was our greatest pleasure to meet with you and speak in regards to the amazing investment opportunity that is Quest. Welcome to the Quest Investments family where our goal is to maximize shareholder wealth while mitigating risk. With a 30 year experienced management team, your investment is in good hands.

At the trade show there were many mortgage pools that were offering 6-7% returns. Contrary to appearances, this is not because they are safe investments vehicles. The reality is that such low returns indicate that the management team is not being as effective as they should be. Here at Quest, our number one priority is to serve our shareholders by maximizing their wealth. That is why our investors enjoy a 12% rate of return, and the testimonials on our website prove their satisfaction with the Quest experience. Our thorough underwriting and conservative lending practices ensure that their investments produce high rates of return while maintaining stablity and safety.

To all of our new contacts: thank you again for giving us the opportunity to speak with you! Quest Investments will continue to expand and increase its pool, and we hope that you will be a part of this amazing growth. Please feel free to give me a call or visit us at InvestinQuest.com to learn more about our mortgage fund and become a Quest Investor.

Shannon Daniele

Co-Founder and Vice President of Quest

877-957-8378

http://www.investinquest.com/

Back from the San Francisco Money Show

Our Quest management team just came back from a highly productive and enjoyable weekend at San Francisco for their annual Money Show. This prestigious event is a great opportunity for up and coming companies to showcase profitable investment opportunities to prospective investors. We were able to make many great friends and acquaintances at the show, and are happy to report that Quest has successfully gained new investors into our family. Our company's unique approach: conservative lending and thorough underwriting combined with abnormally high returns, naturally gained a lot of attention and interest at the show.

As a company that is constantly expanding, we are excited to continue to be a part of conferences, seminars, and mixers. Our goal is to spread the word about our amazing 12% rate of return. If you would like for Quest to speak at your next seminar, please give us a call or contact us via email. We sincerely hope to spread the word about our prosperous investment opportunity, for our goal is to become your instrument to financial success.

Sholeh Lajevardi

Co-Founder and Chief Financial Officer of Quest

877-957-8378

http://www.investinquest.com/

Frequently Asked Questions

How does a Mortgage Fund Work?
An investor purchases shares of the Mortgage Fund. The Mortgage Fund then lends the money out to borrowers. Borrowers make interest payments to the fund each month, and the Fund pays out a dividend to investors. The Mortgage Fund contains a large number of highly diverse trust deed loans as security for the investment, similar to a "mutual fund" of loans, See our Fund Downloads.

What is the minimum investment?
The minimum investment amount is $25,000 (25 shares). If investing IRA funds, the minimum investment amount is $20,000 (20 shares) For investments.

How much interest will I earn on my investment?
Currently, investors of the Quest Mortgage Fund, LLC are earning up to 12% annually.

How often does the Fund pay a dividend?
The Fund pays a monthly dividend, which is paid out on the 20th of each month for the previous month's interest. Investors have a choice of monthly cash distributions, distributions reinvested by purchasing additional shares, or a combination of both.

Do I receive a monthly statement?
You will receive a statement monthly or quarterly depending on your Request, similar to a mutual Fund Statement.

Can I invest my IRA in the Fund?
Yes, self-directed IRA's can invest in the Fund.

Are there suitability standards?
Shares are offered exclusively to qualified investors who are California Residents and who meet certain minimum standards of income and assets.

Where are the properties located that the Fund loans money on?
100% of the portfolio is secured by California real estate.

Can a shareholder withdraw their investment?
A Member may withdraw as a Member at any time, however, the right to sell shares and realize a return of capital is available under limited circumstances until the termination of the Fund. The Fund will use its best efforts to redeem shares for Members within 30 days of receiving a written request from the Member. Large withdrawals generally require longer waiting periods.

What information is provided for tax reporting?
Income information is reported on a Schedule K-1.

How do I invest?
The offering is made through the Offering Circular. After reading the Offering Circular, complete the subscription agreement and return it with your check, made payable to Quest Mortgage Fund, LLC.

How can I receive more information?
For more information or to request an Offering Circular, please call us toll-free at 877-957-8378 or via email at sdaniele@questfi.com We are always available to meet with you and answer any questions you may have regarding Quest Funding and the Quest Mortgage Fund, LLC.