Company: BHM
Filing Date: 2025-03-28
Form Type: POS AM
Source: 0001104659-25-029225
Chunk: 158

Company: Bluerock Homes Trust, Inc.
Filing Date: 2025-03-28
Form: POS AM
Chunk 158
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 as collateral and duration
of investment. In measuring the CECL provision for investments that share similar characteristics, we apply a default rate to the investments
for the remaining loan investment hold period. As we do not have a significant historical population of loss data on our loan investments,
our 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, we perform 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 we expect repayment through the sale of the collateral, we calculate
expected credit losses based on the value of the underlying collateral as of the reporting date. During this review process, if we determine
that it is probable that we 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.

In estimating the value of the underlying collateral when determining if a loan investment is fully recoverable, we evaluate 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 our 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. We 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 is less than the net carrying value, we record a provision for credit loss on that loan investment. As the investment no longer displays the characteristics that are similar to those of the pool of loan investments, the investment is removed from the CECL collective (pool) analysis described above.

Preferred Equity Investments

We perform an individual
assessment of expected credit losses for our preferred equity investments, which are accounted for as AFS debt securities, that have
an unrealized loss recorded at the reporting date. If it is determined that the borrower is experiencing financial difficulty, or a foreclosure
is probable, or we expect repayment through the sale of the collateral, we calculate expected credit losses based on the value of the
underlying collateral as of the reporting date. During this review process, if we determine that it