Why We Invested: Kah Capital Management

By Catherine Toner, Managing Director of Impact Investing 

At Gary Community Ventures, we believe that ownership of appreciating assets is one of the most powerful pathways to economic mobility. Much of our impact investing portfolio has been built around this thesis, from employee ownership to renter wealth to first-time homeownership. Our investment in Kah Capital Management’s Fund III (Kah) represents a natural and strategic extension of this work: preserving ownership for families who already have a home, but who are at risk of losing it due to temporary financial hardship.

Kah is an opportunity emblematic of impact investing strategy: value-creation that is inextricably linked with delivering impact. Their strategy demonstrates how capital markets can be deployed to keep families in their homes to preserve and grow generational wealth, while also delivering strong, risk-adjusted market-rate returns.

The Challenge: Protecting the Primary Asset for LMI Families

Homeownership is a cornerstone of the American Dream, making up over 50% of household wealth for all but the top 20% of households across the US. For low-to-moderate-income individuals with a significant amount of home equity but insignificant savings, an economic shock, like the loss of a job, a health crisis or divorce, can quickly propel a home-owning family into foreclosure.

While borrowers are typically able to resume payments, difficulty in catching up on missed payments coupled with traditional loan servicers’ incentive to foreclose, can lead to catastrophic shifts in a family’s socioeconomic status.

The Solution: Restructuring loans to help homeowners through an economic setback 

Rather than treating all past due borrowers the same, Kah recognizes that temporary hardship can be resolved with the right support. They purchase reperforming loans (loans where borrowers have made intermittent payments) at a discount — primarily from government-sponsored enterprises and banks — and then work with specialized servicers that are incentivized to intervene early and work with the homeowner to restructure the loan and become current. 

Their strategy benefits homeowners who have demonstrated a strong willingness to pay by putting them on a path to remain in their home and retain their hard-earned equity. As stabilized borrowers make consistent payments, the value of the underlying loan pools improves significantly, driving returns for investors. 

While Kah operates nationally, their work has significant relevance for our home state, having invested $15 million in Colorado mortgages through their first two funds. Through investment in Fund III, we expect to support Kah’s purchase of at least an additional $10 million in the state.

We are thrilled to partner with the Kah team as they execute their strategy. When engaging in a sector as large as mortgage credit, directing more capital with borrower-aligned incentives isn’t just scaled impact – it’s good investing.