Company: BHM
Filing Date: 2025-05-09
Form Type: 424B3
Source: 0001104659-25-046667
Chunk: 7

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-05-09
Form: 424B3
Chunk 7
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 evaluating
the impact of adopting ASU 2024-03 on its financial disclosures.

Current Expected Credit Losses

Notes Receivable

The
Company estimates provision for credit losses on its loan investments (notes receivable) under CECL. This method is based on expected
credit losses for the life of the investment as of each balance sheet date. The method for calculating the estimate of expected credit
loss considers historical experience and current conditions for similar loans and reasonable and supportable forecasts about the future.

The
Company estimates its provision for credit losses using a collective (pool) approach for investments with similar risk characteristics,
such as collateral and duration of investment. In measuring the CECL provision for investments that share similar characteristics, the
Company applies a default rate to the investments for the remaining loan investment hold period. As the Company does not have a significant
historical population of loss data on its loan investments, the Company’s default rate utilized for CECL is based on an external
historical loss rate for commercial real estate loans.

In
addition to analyzing investments as a pool, the Company performs an individual investment assessment of expected credit losses. If it
is determined that the borrower is experiencing financial difficulty, or a foreclosure is probable, or the Company expects repayment through
the sale of the collateral, the Company calculates expected credit losses based on the value of the underlying collateral as of the reporting
date. During this review process, if the Company determines that it is probable that it will not be able to collect all amounts due for
both principal and interest according to the contractual terms of an investment, that loan investment is not considered fully recoverable
and a provision for credit loss is recorded.

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Table of Contents

In
estimating the value of the underlying collateral when determining if a loan investment is fully recoverable, the Company evaluates estimated
future cash flows to be generated from the collateral underlying the investment. The inputs and assumptions utilized to estimate the future
cash flows of the underlying collateral are based upon the Company’s evaluation of the operating results, economy, market trends,
and other factors, including judgments regarding costs to complete any construction activities, lease-up and occupancy rates, rental rates,
and capitalization rates utilized to estimate the projected cash flows at the disposition. The Company may also obtain a third-party valuation
which may value the collateral through an “as-is” or “stabilized value” methodology. If upon completion of the
valuation the fair value of the underlying collateral securing the investment