10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

Commission file number: 000-55601

REDWOOD MORTGAGE INVESTORS IX, LLC

(Exact name of registrant as specified in its charter)

Delaware	26-3541068
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

177 Bovet Road, Suite 520, San Mateo, CA	94402
(Address of principal executive offices)	(Zip Code)

(650) 365-5341

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
none

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

Part I – FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

REDWOOD MORTGAGE INVESTORS IX, LLC

Balance Sheets

June 30, 2021 (unaudited) and December 31, 2020 (audited)

	June 30,			December 31,
ASSETS	2021			2020
Cash, in banks	$	1,199,048		$	2,299,113
Loan payments in trust		49,954			130,898
Loans
Principal		79,876,199			82,274,807
Advances		24,539			14,331
Accrued interest		706,473			683,975
Prepaid interest		(148,000	)		—
Loan balances secured by deeds of trust		80,459,211			82,973,113
Allowance for loan losses		(55,000	)		(55,000	)
Loan balances secured by deeds of trust, net		80,404,211			82,918,113
Debt issuance costs, net		41,103			68,506
Receivable from related party		56,387			—
Total assets	$	81,750,703		$	85,416,630
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities	$	103,418		$	99,516
Payable to related party		13,826			4,185
Line of credit		7,600,000			10,000,000
Total liabilities		7,717,244			10,103,701
Commitments and contingencies (Note 6)
Members’ capital, net		77,601,483			79,124,948
Receivable from manager (formation loan)		(3,568,024	)		(3,812,019	)
Members’ capital, net of formation loan		74,033,459			75,312,929
Total liabilities and members’ capital	$	81,750,703		$	85,416,630

The accompanying notes are an integral part of these unaudited financial statements.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Income

For the Three and Six Months Ended June 30, 2021 and 2020 (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Revenue
Interest income	$	1,705,119		$	1,511,999		$	3,384,828		$	2,939,676
Interest expense		(123,469	)		(46,744	)		(259,680	)		(46,744	)
Net interest income		1,581,650			1,465,255			3,125,148			2,892,932
Late fees		23,396			4,954			32,765			13,002
Gain on sale, loans		—			—			—			—
Total revenue, net		1,605,046			1,470,209			3,157,913			2,905,934
Provision for (recovery of) loan losses		—			—			—			(75	)
Operations expense
Mortgage servicing fees		51,988			44,058			103,960			86,331
Asset management fees		141,390			135,321			282,780			270,642
Costs from Redwood Mortgage Corp., net (Note 3)		79,466			—			144,262			—
Professional services		141,408			150,499			374,095			296,085
Other		12,082			7,280			22,698			7,347
Total operations expense		426,334			337,158			927,795			660,405
Net income	$	1,178,712		$	1,133,051		$	2,230,118		$	2,245,604
Net income
Members (99%)	$	1,166,925		$	1,121,720		$	2,207,817		$	2,223,147
Manager (1%)		11,787			11,331			22,301			22,457
	$	1,178,712		$	1,133,051		$	2,230,118		$	2,245,604

The accompanying notes are an integral part of these unaudited financial statements.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Changes in Members’ Capital

For the Three Months Ended June 30, 2021 (unaudited)

	Members’ Capital			Manager’s Capital		Unallocated Organization and Offering Expenses			Members’ Capital, net
Balance at March 31, 2021	$	80,286,365		$	192,288	$	(1,758,812	)	$	78,719,841
Net income		1,166,925			11,787		—			1,178,712
Earnings distributed to members		(1,118,603	)		—		—			(1,118,603	)
Earnings distributed used in DRIP		558,803			—		—			558,803
Members’ redemptions		(1,773,550	)		—		—			(1,773,550	)
Organization and offering expenses allocated		(76,656	)		—		76,656			—
Organization and offering expenses repaid by RMC		—			—		35,193			35,193
Early withdrawal penalties		—			—		1,087			1,087
Balance at June 30, 2021	$	79,043,284		$	204,075	$	(1,645,876	)	$	77,601,483

For the Six Months Ended June 30, 2021 (unaudited)

	Members’ Capital			Manager’s Capital		Unallocated Organization and Offering Expenses			Members’ Capital, net
Balance at December 31, 2020	$	80,801,456		$	181,774	$	(1,858,282	)	$	79,124,948
Net income		2,207,817			22,301		—			2,230,118
Earnings distributed to members		(2,244,994	)		—		—			(2,244,994	)
Earnings distributed used in DRIP		1,133,283			—		—			1,133,283
Members’ redemptions		(2,700,057	)		—		—			(2,700,057	)
Organization and offering expenses allocated		(154,221	)		—		154,221			—
Organization and offering expenses repaid by RMC		—			—		53,241			53,241
Early withdrawal penalties		—			—		4,944			4,944
Balance at June 30, 2021	$	79,043,284		$	204,075	$	(1,645,876	)	$	77,601,483

The accompanying notes are an integral part of these unaudited financial statements.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Changes in Members’ Capital

For the Three Months Ended June 30, 2020 (unaudited)

	Members’ Capital			Manager’s Capital		Unallocated Organization and Offering Expenses			Members’ Capital, net
Balance at March 31, 2020	$	81,747,167		$	144,394	$	(2,165,927	)	$	79,725,634
Net income		1,121,720			11,331	—				1,133,051
Earnings distributed to members		(1,115,768	)	—		—				(1,115,768	)
Earnings distributed used in DRIP		573,232		—		—				573,232
Members’ redemptions		(698,527	)	—		—				(698,527	)
Organization and offering expenses allocated		(80,194	)	—			80,194		—
Organization and offering expenses repaid by RMC	—			—			11,849			11,849
Early withdrawal penalties	—			—			5,524			5,524
Balance at June 30, 2020	$	81,547,630		$	155,725	$	(2,068,360	)	$	79,634,995

For the Six Months Ended June 30, 2020 (unaudited)

	Members’ Capital			Manager’s Capital		Unallocated Organization and Offering Expenses			Members’ Capital, net
Balance at December 31, 2019	$	81,755,930		$	133,268	$	(2,260,068	)	$	79,629,130
Net income		2,223,147			22,457	—				2,245,604
Earnings distributed to members		(2,246,645	)	—		—				(2,246,645	)
Earnings distributed used in DRIP		1,162,796		—		—				1,162,796
Members’ redemptions		(1,186,689	)	—		—				(1,186,689	)
Organization and offering expenses allocated		(160,909	)	—			160,909		—
Organization and offering expenses repaid by RMC	—			—			20,861			20,861
Early withdrawal penalties	—			—			9,938			9,938
Balance at June 30, 2020	$	81,547,630		$	155,725	$	(2,068,360	)	$	79,634,995

The accompanying notes are an integral part of these unaudited financial statements.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

	Six Months Ended June 30,
	2021			2020
Operations
Interest income received	$	3,510,328		$	2,937,891
Interest expense paid		(237,118	)		(24,028	)
Late fees and other loan income		113,709			13,002
Operations expense		(965,798	)		(642,691	)
Total cash provided by operations		2,421,121			2,284,174
Investing – loans
Loans funded		(18,380,800	)		(21,975,850	)
Principal collected		19,903,312			22,335,694
Loan transferred from related mortgage fund		(4,671,760	)		(2,296,677	)
Loans transferred to related mortgage funds		2,559,588			—
Loans sold to non-affiliate		2,988,268			—
Advances (made on) received from loans		(10,208	)		1,434
Total cash provided by (used in) investing		2,388,400			(1,935,399	)
Financing
Members' capital
Distributions to members
Earnings distributed, net of DRIP		(1,111,711	)		(1,083,849	)
Redemptions, net of early withdrawal penalties		(2,689,428	)		(1,164,756	)
Total distributions to members		(3,801,139	)		(2,248,605	)
Organization and offering expenses received, net		53,241			20,861
Formation loan collected		238,312			—
Cash used in members' capital		(3,509,586	)		(2,227,744	)
Line of credit
Advances		2,655,000			13,200,000
Repayments		(5,055,000	)		(5,000,000	)
Debt issuance costs		—			(109,526	)
Cash (used in) provided by line of credit		(2,400,000	)		8,090,474
Total cash (used in) provided by financing		(5,909,586	)		5,862,730
Net (decrease) increase in cash		(1,100,065	)		6,211,505
Cash, beginning of period		2,299,113			4,450,529
Cash, end of period	$	1,199,048		$	10,662,034

Non-cash financing activity for the six months ended June 30, 2021 and 2020 includes early withdrawal penalties of $10,627 and $21,933, respectively, which reduced members’ capital by $4,944 and $9,938, respectively, as these amounts were applied to unallocated organizational and offering expenses and the formation loan in the amount of $5,683 and $11,995, respectively. Non-cash financing activities for the six months ended June 30, 2021 and 2020 also includes earnings distributed to the dividend reinvestment plan of $1,133,283 and $1,162,796, respectively. Non-cash investing activity for the six months ended June 30, 2020 includes $20,068 for principal charged off. There was no principal charged off for the six months ended June 30, 2021.

The accompanying notes are an integral part of these unaudited financial statements.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Statements of Cash Flows

For the Six Months Ended June 30, 2021 and 2020 (unaudited)

	Six Months Ended June 30,
Reconciliation of net income to total cash provided by operations	2021			2020
Net income	$	2,230,118		$	2,245,604
Adjustments to reconcile net income to net cash provided by operations
Charge off of accrued interest		—			(11,857	)
Amortization of debt issuance costs		27,402			13,618
Provision for (recovery of) loan losses		—			(75	)
Change in operating assets and liabilities
Loan payments in trust		80,944			—
Accrued interest		(22,499	)		(47,161	)
Prepaid interest		148,000			57,233
Receivable from related party		(56,387	)		(12,235	)
Accounts payable and accrued liabilities		3,902			27,630
Payable to related party		9,641			11,417
Total adjustments		191,003			38,570
Total cash provided by operations	$	2,421,121		$	2,284,174

The accompanying notes are an integral part of these unaudited financial statements.

7

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

NOTE 1 – ORGANIZATION AND GENERAL

Redwood Mortgage Investors IX, LLC (“RMI IX” or “the company”) is a Delaware limited liability company formed in October 2008 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust. The company is externally managed by Redwood Mortgage Corp (“RMC” or “the manager”). RMC provides the personnel and services necessary for the company to conduct its business as the company has no employees of its own. The mortgage loans the company funds and invests in are arranged and generally are serviced by RMC.

In the opinion of management of RMC, the accompanying unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial information included therein. These unaudited financial statements should be read in conjunction with the audited financial statements included in the company’s Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (SEC). The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results to be expected for the full year.

The rights, duties and powers of the members and manager of the company are governed by the Ninth Amended and Restated Limited Liability Company Operating Agreement of RMI IX (the “Operating Agreement”), the Delaware Limited Liability Company Act and the California Revised Uniform Limited Liability Company Act.

Members representing a majority of the outstanding units may, without the concurrence of the managers, vote to: (i) dissolve the company, (ii) amend the Operating Agreement, subject to certain limitations, (iii) approve or disapprove the sale of all or substantially all of the assets of the company or (iv) remove or replace one or all of the managers. Where there is only one manager, a majority in interest of the members is required to elect a new manager to continue the company business after a manager ceases to be a manager due to its withdrawal.

The following is a summary of certain provisions of the Operating Agreement and is qualified in its entirety by the terms of the Operating Agreement. Members should refer to the Operating Agreement for complete disclosure of its provisions.

The manager is solely responsible for managing the business and affairs of the company, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the company. RMC is entitled to one percent (1%) of the profits and losses of the company and to fees and reimbursements of qualifying costs as specified in the Operating Agreement. 

The company’s primary investment objectives are to:

• yield a favorable rate of return from the company’s business of making and/or investing in loans;

• preserve and protect the company’s capital by making and/or investing in loans secured by California real estate, preferably income-producing properties geographically situated in the San Francisco Bay Area and the coastal metropolitan regions of Southern California; and,

• generate and distribute cash flow from these mortgage lending and investing activities.

Net income (or loss) is allocated among the members according to their respective capital accounts after one percent (1%) of the net income (or loss) is allocated to the manager. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Federal and state income taxes are the obligation of the members, other than the annual California franchise tax and the California LLC cash receipts taxes paid by the company.

The company’s net income, cash available for distribution, and net-distribution rate fluctuates depending on:

• loan origination volume and the balance of capital available to lend;

• the current and future interest rates negotiated with borrowers;

• line of credit advances, repayments and the interest rate thereon;

• loan sales to unaffiliated third parties, and any gains received thereon;

• the amount of fees and cost reimbursements to RMC;

• the timing and amount of other operating expenses, including expenses for professional services;

• the timing and amount of payments from RMC on the formation loan; and,

• fee and/or cost reimbursements waived, if any, from RMC.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

The ongoing sources of funds for loans are the proceeds (net of redemption of members’ capital and operating expenses) from:

• loan payoffs;

• borrowers’ monthly principal and interest payments;

• line of credit advances;

• loan sales to unaffiliated third parties;

• payments from RMC on the outstanding balance of the formation loan; and

• sale of units to members participating in the dividend reinvestment plan.

The company intends to hold until maturity the loans in which it invests and does not presently intend to invest in mortgage loans primarily for the purpose of reselling such loans in the ordinary course of business; however, the company may sell mortgage loans (or fractional interests therein) when the manager determines that it appears to be advantageous for the company to do so, based upon then current interest rates, the length of time that the loan has been held by the company, the company’s credit risk and concentration risk and the overall investment objectives of the company. Loans sold to third parties may be sold for par, at a premium or, in the case of non-performing or under performing loans, at a discount. Company loans may be sold to third parties or to the manager or its related mortgage funds; however, any loan sold to the manager or a related mortgage fund will be sold for a purchase price equal to the greater of (i) the par value of the loan or (ii) the fair market value of the loan. The manager will not receive commissions or broker fees with respect to loan sales conducted for the company; however, selling loans will increase members’ capital available for investing in new loans for which the manager will earn brokerage fees and other forms of compensation.

COVID-19

Given the ongoing and dynamic nature of the impacts on peoples’ lives, the healthcare system and its resources, and the economy and real estate markets since the World Health Organization declared the COVID-19 outbreak a pandemic, it is not possible to predict or estimate the impact - for the remainder of 2021 and the years beyond - of the COVID-19 outbreak on the financial condition, the liquidity or the results of operations of the company. While the company has not incurred material disruptions to date, the rapid developments and fluidity of COVID-19 may cause the manager to continue to adjust its business operations, lending parameters, and collection practices and processes for past-due loans. The majority of borrowers have continued to make monthly payments and/or negotiated in good faith resulting in extensions on terms consistent with the original loan terms. No loan losses were incurred in the first six months of 2021 and none were incurred in 2020.

During 2020 and to a lesser extent in 2021, as a result of the disruptions caused by the pandemic, the company has experienced a manageable increase in requests for loan extensions, payment delinquencies and requests for forbearance agreements from borrowers. Market conditions, regulatory restrictions on our enforcement rights with respect to loans in default, delays in foreclosure proceedings, including moratoriums in some jurisdictions, and backlogs in the courts has increased the timeline to resolve non-performing and /or maturing loans.

During 2020, the “Coronavirus Aid, Relief, and Economic Security (“CARES”) Act” and the “Consolidated Appropriations Act (“CAA”) of 2020” were signed into law. The CARES Act includes various measures to provide relief to companies and the CAA extended some of the CARES Act programs along with adding new stimulus provisions. In March 2021, the American Rescue Plan Act of 2021 was also passed which further extended several CARES Act relief programs and other assistance. The manager has not taken and does not expect to take advantage of any measures under the CARES Act, the CAA or the American Rescue Plan Act. 

Distribution policy/Distribution reinvestment plan (DRIP)

Cash available for distribution at the end of each calendar month is allocated ninety-nine percent (99%) to the members and one percent (1%) to the manager. Cash available for distribution means cash flow from operations (excluding repayments for loan principal and other capital transaction proceeds) less amounts set aside for creation or restoration of reserves. The manager may withhold from cash otherwise distributable to the members with respect to any period the respective amounts of O&O expenses allocated to the members’ accounts for the applicable period pursuant to the company’s reimbursement to RMC and allocation to members’ accounts of O&O expenses. The amount otherwise distributable, less the respective amounts of O&O expenses allocated to members, is the net distribution. Per the terms of the company’s Operating Agreement, cash available for distribution to the members is allocated among the members in proportion to their percentage interests (except with respect to differences in the amounts of O&O expenses allocated to the respective members during the applicable period) and in proportion to the number of days during the applicable month that they owned such percentage interests.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

See Note 3 (Manager and Other Related Parties) to the financial statements for a detailed discussion on the allocation of O&O expenses to members’ accounts.

Cash available for distributions allocable to members who have elected to receive distributions is disbursed at the end of each calendar month. The manager’s allocable share of cash available for distribution is also distributed not more frequently than cash distributions to members.

The distribution reinvestment plan (DRIP) provision of the Operating Agreement permits members to elect to have all or a portion of their monthly distributions reinvested in the purchase of additional units. Cash available for distributions allocable to members who have elected to participate in the DRIP is distributed and reinvested in units at each month end.

In May 2019, the company filed a Registration Statement on Form S-3 with the SEC (SEC File No. 333-231333) that went effective May 9, 2019, to offer up to 15,000,000 units ($15,000,000) to members of record as of April 30, 2019 who had previously elected to participate in the DRIP or who later provide written notice to the manager electing to participate in the DRIP, in those states in which approval has been obtained. As of June 30, 2021, the aggregate gross proceeds from sales of units to members under our DRIP pursuant to the May 2019 Form S-3 Registration Statement is approximately $5,051,000.

To determine the amount of cash to be distributed in any month, the company relies in part on its forecast of full-year net income, which takes into account the difference between the forecasted net income for the remainder of the year and actual results in the year to date and the requirement to maintain a cash reserve. As of June 30, 2021, the difference between earnings allocated to members’ capital accounts and net income available to members was approximately $139,000, and is expected to be offset by future earnings in excess of net distributions in 2021 as a result of borrower payments received including forgone interest on loans designated non-accrual.

Liquidity and unit redemption program

There are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units and none is expected to develop. In order to provide liquidity to members, the company’s Operating Agreement includes a unit redemption program, whereby beginning one year from the date of purchase of the units, a member may redeem all or part of their units, subject to certain limitations.

The price paid for redeemed units is based on the lesser of the purchase price paid by the redeeming member or the member’s capital account balance as of the date of each redemption payment. Redemption value – for other than DRIP units - is calculated based on the period from date of purchase as follows: after 2 years 94% of the purchase price or of the capital balance, whichever is less; after 3 years 96%; after four years 98%; and after five years 100%. 

The company redeems units quarterly, subject to certain limitations as provided for in the Operating Agreement. The maximum number of units which may be redeemed per quarter per individual member shall not exceed the greater of (i) 100,000 units, or (ii) 25% of the member’s total outstanding units. For redemption requests requiring more than one quarter to fully redeem, the percentage discount amount if any, that applies when the redemption payments begin continues to apply throughout the redemption period and applies to all units covered by such redemption request regardless of when the final redemption payment is made.

The company has not established a cash reserve from which to fund redemptions. The company’s capacity to redeem units upon request is limited by the availability of cash and the company’s cash flow. As provided in the Operating Agreement, the company will not, in any calendar year, redeem more than five percent (5%) of the weighted average number of units outstanding during the twelve-month period immediately prior to the date of the redemption. In the event unit withdrawal requests exceed 5% in any calendar year, units will be redeemed in the order of priority provided in the Operating Agreement.

Manager’s interest

If a manager is removed, withdrawn or terminated, the company will pay to the manager all amounts then accrued and due to the manager. Additionally, the company will terminate the manager’s interest in the company’s profits, losses, distributions and capital by payment of an amount in cash equal to the then-present fair value of such interest.

Term of the company

The term of the company will continue operations until 2028, unless sooner terminated as provided in the Operating Agreement, or extended by majority vote of the members.

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REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).

Management estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate owned, at acquisition and subsequently. Actual results could differ materially from these estimates.

Fair value estimates

GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair values of assets and liabilities are determined based on the fair-value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable, or inputs derived from or corroborated by market data.

• Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the company’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the company’s own data.

The fair value of real property is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach.

These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, including the consideration of adjustments made for any attributes specific to the real property.

Management has the requisite familiarity with the real estate markets it lends in and of the specific properties lent on to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

Cash in banks

Certain of the company’s cash balances in banks exceed federally insured limits of $250,000. The bank or banks in which funds are deposited are reviewed periodically for their general creditworthiness/investment grade credit rating. See Note 5 (Line of Credit) for compensating balance arrangements.

11

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Loans and interest income

Performing loans are carried at amortized cost which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the company’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. For performing loans, interest is accrued daily on the principal plus advances, if any.

Non-performing loans (i.e., loans with a payment in arears) less than 180 days delinquent continue to recognize interest income as long as the loan is in the process of collection and is considered to be well-secured. Non-performing loans are placed on non-accrual status if 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement. Late fees are recognized in the period received.

The company may fund a specific loan net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction to the principal.

In the normal course of the company’s operating activities, performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans.

From time to time, the manager negotiates and enters into loan modifications with borrowers whose loans are delinquent (non-performing). If a borrower is experiencing financial difficulties and a loan modification were to result in an economic concession to the borrower (i.e., a significant delay or reduction in cash flows compared to the original note), the modification is deemed a troubled debt restructuring (TDR).

In March 2020, various federal regulatory agencies issued an interagency statement on loan modifications and reporting for financial institutions working with borrowers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID- 19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

The company funds loans with the intent to hold the loans until maturity. From time to time the company may sell certain loans when the manager determines it to be in the best interest of the company. Loans are classified as held-for-sale once a decision has been made to sell loans and the loans held-for-sale have been identified. Loans classified as held for sale are carried at the lower of cost or fair value.   

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks.

Allowance for loan losses

Loans and the related accrued interest and advances (i.e., the loan balance) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the net realizable value (i.e., fair value less the cost to sell) of the collateral, net of any senior liens exceeds the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon.

If based upon current information and events, it is deemed probable the company will not collect substantially all amounts due according to the contractual terms of the original loan agreement, then a loan is designated as impaired. An insignificant delay or insignificant shortfall in the amount of payments does not constitute non-performance with the contractual terms of the original loan agreement if the manager expects to collect the amounts due including interest accrued at the contractual interest rate for the period of delay.  In determining the probability that the borrower will not substantially perform according to the terms of the original loan agreement, the manager considers the following:

• payment status – if payments are in arrears 90+ days (typically 3 payments past due) loans are designated impaired unless resolution of the delinquency is forthcoming without significant delay;

• bankruptcy – if the borrower files bankruptcy, the loan is designated impaired;

• notice of sale – if the company files a notice of sale, the loan is designated impaired.

12

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Payments on loans designated as impaired are applied in the following order: late fees, accrued interest, advances, and lastly to principal.

For loans that are deemed collateral dependent for repayment, a provision for loan losses is recorded to adjust the allowance for loan losses (principal and/or recorded interest) in an amount such that the net carrying amount (unpaid principal plus recorded interest, less the specific allowance) is reduced to the lower of the loan balance or the estimated fair value of the related collateral, net of any costs to sell and net of any senior debt and claims.

The company charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. Any amounts collected after a charge off is deemed a recovery of loan losses. If the loan goes to foreclosure, an updated appraisal is ordered and the recorded investment in the loan is adjusted to the net realizable value of the REO to be acquired. The adjustment is made to the specific reserve in the allowance for loan losses by a charge or a credit to the provision for loan losses.

Real estate owned (REO)

Real estate owned, or REO, is property acquired in full or partial settlement of loan obligations generally through foreclosure and is recorded at acquisition at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expenses. Any recovery in the fair value subsequent to such a write down is recorded and is not to exceed the value recorded at acquisition. Recognition of gains or losses on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Debt issuance costs

Debt issuance costs are the fees and commissions incurred in the course of obtaining a line of credit for services from banks, law firms and other professionals and are amortized on a straight-line basis, which approximates the interest method, as interest expense over the term of the line of credit.

Recently issued accounting pronouncements

- Accounting and Financial reporting for Expected Credit Losses

The FASB issued an Accounting Standards Update (“ASU”) that significantly changes how entities will account for credit losses for most financial assets that are not measured at fair value through net income. The new standard will supersede currently in effect guidance and applies to all entities. Entities will be required to use a current expected credit loss (“CECL”) model to estimate credit impairment. This estimate will be forward-looking, meaning management will be required to use not only historical trends and current conditions, but must also consider forecasts about future economic conditions to determine the expected credit loss over the remaining life of an instrument. This will be a significant change from the current incurred credit loss model, and generally may result in allowances being recognized in earlier periods than under the current credit loss model. The ASU is effective for smaller reporting companies for interim and annual reporting periods in 2023.

RMI IX invests in real estate secured loans made with the expectation that the possibility of credit losses is remote as a result of substantial protective equity provided by the underlying collateral. The real estate secured programs and low loan-to-value ratios have caused the Company to expect that the adoption of the CECL model from the incurred loss models presently in use as to credit loss recognition will likely not materially impact the reported results of operations or financial position. However, the impact, if any, upon adoption will be dependent upon the facts and circumstances relating to the company’s loans at that date.

- Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides temporary optional expedients for various agreements and contracts that utilize the London Interbank Offered Rate (“LIBOR”) as the benchmark reference rate. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement

13

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the potential discontinuance of LIBOR in relation to the company’s line of credit and has not yet adopted the optional relief.

NOTE 3 – MANAGER AND OTHER RELATED PARTIES

The Operating Agreement provides for compensation to the manager and for the reimbursement of qualifying costs as detailed below. RMC is entitled to 1% of the net income or loss of the company. RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income), which increased the net income, cash available for distribution, and the net-distribution rate. The cost-reimbursement waivers in the three and six months ended June 30, 2021 and 2020, by RMC were not made for the purpose of providing RMI IX with sufficient funds to satisfy any required level of distributions, as the Operating Agreement has no such required level of distributions, nor to meet withdrawal requests.  

Mortgage servicing fees

The manager is entitled to receive a servicing fee of up to one-quarter of one percent (0.25%) annually of secured loan principal. The mortgage servicing fees are accrued monthly on all loans. Remittance to RMC is made monthly unless the loan has been assigned a specific loss reserve, at which point remittance is deferred until the specific loss reserve is no longer required, or the property securing the loan has been acquired by the company.

Asset management fees

The manager is entitled to receive a monthly asset management fee for managing RMI IX’s assets, liabilities, and operations in an amount up to three-quarters of one percent (0.75%) annually of the portion of the capital originally committed to investment in mortgages, not including leverage, and including up to two percent (2%) of working capital reserves.

Costs from RMC

The manager is entitled to request reimbursement for operations expense incurred on behalf of RMI IX, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. Qualifying personnel/compensation costs and consulting fees are tracked by business activity, and then costs of qualifying activities are allocated to RMI IX pro-rata based on the percentage of RMI IX’s members’ capital to the total capital of all related mortgage funds managed by RMC. Certain other non-personnel, qualifying costs such as postage and out-of-pocket general and administrative expenses can be tracked by RMC as specifically attributable to RMI IX; other non-personnel, qualifying costs (e.g., RMC’s accounting and audit fees, legal fees and expenses, occupancy, and insurance premiums) are allocated pro-rata based on the percentage of RMI’s members’ capital to total capital of the related mortgage funds managed by RMC. The amount of qualifying costs attributable to RMI IX incurred by RMC was $158,526 and $138,098 in the three months ended June 30, 2021 and 2020, respectively and $304,696 and $290,814 for the six months ended June 30, 2021 and 2020, respectively. The reimbursement of costs from RMC waived was $79,060 and $138,098 in the three months ended June 30, 2021 and 2020, respectively and $160,434 and $290,814 in the six months ended June 30, 2021 and 2020, respectively.

Loan administrative fees

The manager is entitled to receive a loan administrative fee of up to one percent (1%) of the principal amount of each new loan funded or acquired for services rendered in connection with the selection and underwriting of loans payable upon the closing or acquisition of each loan. Since August 2015, RMC, at its sole discretion, has waived loan administrative fees on new originations. The total amount of loan administrative fees chargeable was $121,900 and $156,023 in the three months ended June 30, 2021 and 2020, respectively and $183,808 and $219,759 in the six months ended June 30, 2021 and 2020, respectively.

14

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Commissions and fees paid by the borrowers to RMC

- Brokerage commissions, loan originations

For fees in connection with the review, selection, evaluation and negotiation of loans (including extensions), RMC may collect a loan brokerage commission that is expected to range from approximately 1.5% to 5% of the principal amount of each loan made during the year. Total loan brokerage commissions are limited to an amount not to exceed 4% of the total company assets per year. The loan brokerage commissions are paid by the borrowers to RMC, and thus are not an expense of the company. Loan brokerage commissions paid by the borrowers to RMC approximated $266,000 and $345,000 for three months ended June 30, 2021 and 2020, respectively and $427,000 and $503,000 for the six months ended June 30, 2021 and 2020, respectively.  

- Other fees

RMC receives fees for processing, notary, document preparation, credit investigation, reconveyance and other mortgage related fees. The amounts received are customary for comparable services in the geographical area where the property securing the loan is located, payable solely by the borrower and not by the company.

Formation loan

Commissions for unit sales to new members paid to broker-dealers (“B/D sales commissions”) and premiums paid to certain investors upon the purchase of units were paid by RMC and were not paid directly by RMI IX out of unit-sales proceeds. Instead, RMI IX advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums to be paid to investors. Such advances in total were not to exceed seven percent (7%) of offering proceeds. The receivable arising from the advances is unsecured and non-interest bearing and is referred to as the “formation loan.” When offerings of units to new members ended on April 30, 2019, such advances totaled $5,626,566, of which $3,568,024 remains outstanding at June 30, 2021. 

Formation loan transactions for the six months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Balance, January 1	$	3,812,019		$	3,948,064
Payments received from RMC		(238,312	)		—
Early withdrawal penalties applied		(5,683	)		(11,995	)
Balance, June 30	$	3,568,024		$	3,936,069

RMC is repaying the formation loan such that the formation loan is paid by December 31, 2027, and prior to the end of the term of the company in 2028. Beginning December 31, 2020, RMC will make quarterly payments of principal, without interest, of approximately $124,000, less early withdrawal penalties until such time – in the opinion of the manager -as the market uncertainties resulting from the COVID-19 pandemic are substantially resolved and loan brokerage commissions earned by the manager on new loan originations return to pre-pandemic levels. Annual payments of $496,000 are expected to resume by December 2022. The primary source of repayment of the formation loan are the loan brokerage commissions earned by RMC. The formation loan is forgiven if the manager is removed and RMC is no longer receiving payments for services rendered.  

Redemptions of members’ capital

Redemptions of members’ capital for the three and six months ended June 30, 2021 and 2020 are presented in the following table.

	Three months ended				Six months ended
Redemptions	2021		2020		2021		2020
Without penalty	$	1,682,981	$	444,922	$	2,432,327	$	762,594
With penalty		90,569		253,605		267,730		424,095
Total	$	1,773,550	$	698,527	$	2,700,057	$	1,186,689
Early withdrawal penalties	$	2,311	$	12,200	$	10,627	$	21,933

At June 30, 2021, scheduled redemptions of members' capital were $1,205,307, of which $944,301 is payable in 2021, and $261,006 is payable in 2022. Scheduled redemptions of $141,008 are subject to early withdrawal penalties.

15

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Organization and offering expenses

The manager was reimbursed for O&O expenses incurred in connection with the organization of the company and the offering of the units of membership interest including, without limitation, attorneys’ fees, accounting fees, printing costs and other selling expenses (other than sales commissions) in a total amount not exceeding 4.5% of the original purchase price of all units (other than DRIP units) sold in all offerings (hereafter, the “maximum O&O expenses”). RMC paid the O&O expenses in excess of the maximum O&O expenses.

The O&O expenses incurred by RMI IX are allocated to the members as follows - For each of forty (40) calendar quarters or portion thereof after December 31, 2015 that a member holds units (other than DRIP units), the O&O expenses incurred by RMI IX are allocated to and debited from that member’s capital account in an annual amount equal to 0.45% of the member’s original purchase price for those units, in equal quarterly installments of 0.1125% each commencing with the later of the first calendar quarter of 2016 or the first full calendar quarter after a member’s purchase of units, and continuing through the quarter in which such units are redeemed.

Unallocated O&O transactions for the six months ended June 30, 2021 and 2020 are summarized in the following table.

	2021			2020
Balance, January 1	$	1,858,282		$	2,260,068
O&O expenses allocated		(154,221	)		(160,909	)
O&O expenses paid by RMC(1)		(53,241	)		(20,861	)
Early withdrawal penalties applied (2)		(4,944	)		(9,938	)
Balance, June 30	$	1,645,876		$	2,068,360

(1) RMC is obligated per the Operating Agreement to repay RMI IX for the amount of unallocated O&O expenses attributed to a member’s capital account if the member redeems prior to the 40 quarterly allocations. RMC estimated its future obligation to repay unallocated O&O expenses on scheduled redemptions as of June 30, 2021, to be approximately $13,600, which may be offset in part by early withdrawal penalties collected in future periods.

(2) The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

Other related party transactions

- Payable to/receivable from related parties

From time to time, in the normal course of business operations, the company may have payables to and/or receivables from related parties. At June 30, 2021, the receivable from a related party balance of $56,387 consisted primarily of accounts receivable from RMC related to O&O expenses, and the payable to related party balance of $13,826 consisted of accounts payable to a related mortgage fund. At December 31, 2020, the payable to related parties balance consisted of accounts payable and cost reimbursements to the manager and related mortgage fund of $6,452, which was partially offset by a receivable of $2,267 due from the manager and related mortgage fund. The receivable was received from the manager and the payable was paid to the manager in March 2021.

- Loan transactions with related parties

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the RMC managed mortgage funds at par which approximates market value. In the six months ended June 30, 2021, a related mortgage fund transferred to RMI IX five performing loans with aggregate principal of $4,671,760 in-full at par value, which approximates fair value. In the six months ended June 30, 2020 a related mortgage fund transferred to RMI IX one performing loan with principal of $2,296,677 in-full at par value which approximates fair value. RMI IX paid cash for the loans and the related mortgage fund has no continuing obligation or involvement with the loans.

In the six months ended June 30, 2021, RMI IX transferred to related mortgage fund(s) five performing loans with aggregate principal of $2,559,588 in-full at par value, which approximates fair value. The related mortgage fund(s) paid cash for the loans and RMI IX has no continuing obligation or involvement with the loans. No loans were transferred to related mortgage funds in the six months ended June 30, 2020.

16

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

NOTE 4 – LOANS

Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination and are purchased at par value, which approximates fair value. See Note 3 (Manager and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds. 

As of June 30, 2021, 53 loans outstanding (representing 97% of the aggregate principal of the company’s loan portfolio) have a loan term of five years or less. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty provision.

As of June 30, 2021, 29 loans outstanding (representing 28% of the aggregate principal of the company’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal due at maturity. The remaining loans provide for monthly payments of interest only, with the principal due at maturity.

Secured loans unpaid principal balance (principal)

Secured loan transactions for the three and six months ended June 30, 2021 are summarized in the following table.

	Three months ended			Six months ended
Principal, beginning of period	$	83,364,317		$	82,274,807
Loans funded		12,190,000			18,380,800
Principal collected		(12,588,867	)		(19,903,312	)
Loans transferred from related mortgage fund		—			4,671,760
Loans transferred to related mortgage funds		(1,691,251	)		(2,559,588	)
Loans sold to non-affiliate		(1,398,000	)		(2,988,268	)
Principal, June 30	$	79,876,199		$	79,876,199

During the three and six months ended June 30, 2021, the company renewed eight and twelve maturing (or matured) loans with aggregated principal of approximately $10,107,000 and $13,498,000, respectively, which are not included in the activity shown in the table above. The loans were current and deemed well collateralized (i.e., the LTV for the collateral was within lending guidelines) at the time they were extended.

The company funds loans with the intent to hold the loans until maturity, although from time to time the company may sell certain loans when the manager determines it to be in the best interest of the company.

During the three and six months ended June 30, 2021, two and five loans with aggregate principal of approximately $1,398,000 and $2,988,000, respectively were sold to unaffiliated third parties, for an amount that approximated the loan balance at the time of sale.   

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks. Loan payments in trust at June 30, 2021, were disbursed to the company’s account by July 19, 2021. Loan payments in trust at December 31, 2020 were disbursed to the company’s account by January 15, 2021.  

17

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Loan characteristics

Secured loans had the characteristics presented in the following table.

	June 30,			December 31,
	2021			2020
Number of secured loans		59			82
Secured loans – principal	$	79,876,199		$	82,274,807
Secured loans – lowest interest rate (fixed)		6.8	%		6.8	%
Secured loans – highest interest rate (fixed)		10.5	%		10.5	%
Average secured loan – principal	$	1,353,834		$	1,003,351
Average principal as percent of total principal		1.7	%		1.2	%
Average principal as percent of members’ capital, net		1.7	%		1.3	%
Average principal as percent of total assets		1.7	%		1.2	%
Largest secured loan – principal	$	6,735,000		$	6,735,000
Largest principal as percent of total principal		8.4	%		8.2	%
Largest principal as percent of members’ capital, net		8.7	%		8.5	%
Largest principal as percent of total assets		8.2	%		7.9	%
Smallest secured loan – principal	$	62,795		$	104,378
Smallest principal as percent of total principal		0.1	%		0.1	%
Smallest principal as percent of members’ capital, net		0.1	%		0.1	%
Smallest principal as percent of total assets		0.1	%		0.1	%
Number of California counties where security is located		12			14
Largest percentage of principal in one California county		32.4	%		28.2	%
Number of secured loans with prepaid interest		2			—
Prepaid interest	$	148,000		$	—

At June 30, 2021, the company’s largest loan with principal of $6,735,000 is secured by an office building located in Santa Clara County, bears an interest rate of 8.25% and matures on October 1, 2021. As of June 30, 2021, the company had no commitments to lend outstanding and had no construction or rehabilitation loans outstanding.   

Lien position

At funding, secured loans had the lien positions presented in the following table.

	June 30, 2021								December 31, 2020
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		41	$	67,320,452			84	%		56	$	61,066,097			74	%
Second trust deeds		18		12,555,747			16			26		21,208,710			26
Total principal, secured loans		59		79,876,199			100	%		82		82,274,807			100	%
Liens due other lenders at loan closing				35,215,207								45,206,740
Total debt			$	115,091,406							$	127,481,547
Appraised property value at loan closing			$	220,635,000							$	251,970,000
Percent of total debt to appraised values    (LTV) at loan closing(1)				55.7	%							55.6	%

(1) Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing nor does it include decreases or increases on senior liens to other lenders.

18

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Property type

Secured loans summarized by property type are presented in the following table.

	June 30, 2021							December 31, 2020
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(2)		29	$	29,138,849		37	%		47	$	30,297,525		37	%
Commercial		24		46,561,191		58			27		43,692,125		53
Multi-family		5		2,676,159		3			8		8,285,157		10
Land		1		1,500,000		2			—		—		—
Total principal, secured loans		59	$	79,876,199		100	%		82	$	82,274,807		100	%

(2) Single family property type as of June 30, 2021 consists of 8 loans with principal of $9,240,711 that are owner occupied and 21 loans with principal of $19,898,138 that are non-owner occupied. At December 31, 2020, single family property type consisted of 8 loans with principal of $5,565,052 that are owner occupied and 39 loans with principal of $24,732,473 that are non-owner occupied.

Distribution of loans within California

The distribution of secured loans within California by counties is presented in the following table.

	June 30, 2021					December 31, 2020
	Principal		Percent			Principal		Percent
San Francisco Bay Area(3)
Santa Clara	$	25,896,645		32.4	%	$	23,205,654		28.2	%
San Francisco		14,100,411		17.6			11,339,546		13.8
San Mateo		5,646,542		7.1			6,878,086		8.4
Alameda		3,403,137		4.3			6,790,814		8.2
Contra Costa		5,143,834		6.4			1,094,189		1.3
Marin		—		—			1,944,696		2.4
		54,190,569		67.8			51,252,985		62.3
Other Northern California
Placer		1,500,000		1.9			—		0.0
Monterey		—		0.0			1,110,000		1.4
Tehama		404,831		0.5			404,837		0.5
Sacramento		70,729		0.1			104,378		0.1
		1,975,560		2.5			1,619,215		2.0
Northern California Total		56,166,129		70.3			52,872,200		64.3
Los Angeles & Coastal
Los Angeles		7,734,845		9.7			11,775,334		14.3
San Diego		5,787,128		7.2			10,186,152		12.4
Orange		8,469,097		10.6			5,431,677		6.6
Santa Barbara		—		—			290,444		0.3
		21,991,070		27.5			27,683,607		33.6
Other Southern California
San Bernardino		1,719,000		2.2			1,719,000		2.1
Southern California Total		23,710,070		29.7			29,402,607		35.7
Total principal, secured loans	$	79,876,199		100.0	%	$	82,274,807		100.0	%

(3) Includes Silicon Valley

19

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Scheduled maturities

Secured loans scheduled to mature as of June 30, 2021, are presented in the following table.

	Loans		Principal		Percent
2021(4)		17	$	21,585,614		27	%
2022		23		27,199,427		34
2023		8		15,655,754		20
2024		2		3,939,766		5
2025		5		3,745,861		5
Thereafter		1		239,682		—
Total scheduled maturities		56		72,366,104		91
Matured as of June 30, 2021		3		7,510,095		9
Total principal, secured loans		59	$	79,876,199		100	%

(4) Loans scheduled to mature in 2021 after June 30. Includes one loan for which the company entered into a forbearance agreement with the borrower in February 2021 which deferred the maturity date until July 2021. The loan had principal of approximately $1,200,000, which matured December 1, 2020.

Scheduled maturities are presented based on the most recent in-effect agreement with the borrower, including forbearance agreements. As a result, matured loans at June 30, 2021, for the scheduled maturities table may differ from the same captions in the tables of delinquencies and payment in arears that are based on the loan terms and do not consider forbearance agreements. For matured loans, the company may continue to accept payments while pursuing collection of principal or while negotiating an extension of the loan’s maturity date.

It is the company’s experience that the timing of future cash receipts from secured loans will differ from scheduled maturities.  Loans may be repaid or renewed before, at or after the contractual maturity date.

Delinquency/Non-performing secured loans

Secured loans summarized by payment-delinquency status are presented in the following table.

	June 30, 2021				December 31, 2020
	Loans		Principal		Loans		Principal
Current		50	$	67,262,102		73	$	74,041,631
Past Due
30-89 days		4		7,698,356		1		190,195
90-179 days		3		1,766,254		5		4,756,811
180 or more days		2		3,149,487		3		3,286,170
Total past due		9		12,614,097		9		8,233,176
Total principal, secured loans		59	$	79,876,199		82	$	82,274,807

At June 30, 2021 and December 31, 2020, there were two forbearance agreements in effect. One with principal of $990,000 is included in the table above as 90-179 days past due, and one with a principal of $1,200,000 which is included in the table above as 180 or more days past due.

During the six months ended June 30, 2021 the company modified an existing forbearance agreement for a loan included in the table above as 90-179 days past due with principal of $990,000, and a maturity date of December 1, 2025, that renews and follows on a forbearance agreement of October 2020. The loan was designated impaired at December 31, 2020. The 2020 forbearance agreement which expired on February 1, 2021, was renewed effective March 2021, and permits partial monthly payments through July 2021. Deferred interest due for missed and partial payments is added to the balloon payment due at maturity. As of June 30, 2021, the loan was designated impaired.  

No loan forbearance agreements or payment modifications were made during the six months ended June 30, 2021, and none were in effect at December 31, 2020, that would be deemed troubled debt restructurings.  

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REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

At June 30, 2021, and December 31, 2020, the company had one workout agreement with a borrower. The loan, with principal of $190,198 matured on June 1, 2016. The workout agreement was entered into September 2016, whereby the borrower agreed to resume monthly payments. This agreement extended the maturity date through October 1, 2021. As of June 30, 2021, the loan was 90 days delinquent and was designated as impaired and in non-accrual status.

Non-performing secured loans at June 30, 2021, and December 31, 2020, had principal payments in arrears totaling $8,713,190 (9 loans) and $1,577,874 (8 loans), respectively and interest payments in arrears totaling $470,041 and $360,813, respectively. Payments in arrears for non-performing secured loans (i.e., monthly interest and principal payments past due 30 or more days) at June 30, 2021 and December 31, 2020, are presented in the following tables.

	Loans				Principal				Interest(5)
At June 30, 2021	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days    (1-3 payments)		3		1	$	7,510,095	$	789	$	37,813	$	2,987	$	7,551,684
90-179 days    (4-6 payments)		—		3		—		2,251		—		60,606		62,857
180 or more days    (more than 6    payments)		1		1		1,200,000		55		168,000		200,635		1,568,690
Total past due(6)		4		5	$	8,710,095	$	3,095	$	205,813	$	264,228	$	9,183,231

(5) Interest includes foregone interest of approximately $94,500 on non-accrual loans past maturity and approximately $112,500 for monthly payments in arrears. June 2021 interest is due July 1, 2021 and is not included in the payments in arrears at June 30, 2021.

(6) In July 2021, three loans with aggregate principal of $7,510,095 included in the table above as 30-89 days past maturity, paid in full including interest in arrears of $37,813.

	Loans				Principal				Interest(7)
At December 31, 2020	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days    (1-3 payments)		—		1	$	—	$	378	$	—	$	1,509	$	1,887
90-179 days    (4-6 payments)		1		4		376,613		854		—		146,270		523,737
180 or more days    (more than 6    payments)		1		1		1,200,000		29		105,000		108,034		1,413,063
Total past due(8)		2		6	$	1,576,613	$	1,261	$	105,000	$	255,813	$	1,938,687

(7) Interest includes foregone interest of $42,000 on non-accrual loans past maturity and approximately $20,800 for monthly payments in arrears.  December 2020 interest is due January 1, 2021 and is not included in the payments in arrears at December 31, 2020.

(8) One loan with principal of approximately $137,000, which was 180 or more days past due, paid in full in January 2021 and so was not designated as non-performing at December 31, 2020, and is not included in the table above.

21

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Delinquency/Loans in non-accrual status

Secured loans in non-accrual status are summarized in the following table.

	June 30, 2021		December 31, 2020
Number of loans		4		3
Principal	$	4,329,684	$	3,339,684
Advances		20,941		10,320
Accrued interest		214,348		181,060
Total recorded investment	$	4,564,973	$	3,531,064
Foregone interest	$	239,583	$	62,821

Non-performing loans are placed on non-accrual status if 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only (i.e., foregone interest in the table above); however, previously recorded interest is not reversed.

At June 30, 2021, there was one loan with principal of approximately $586,000 which was 90 or more days past due and not in non-accrual status.

At December 31, 2020, five loans with aggregate principal of $4,703,296 were 90 days or more days past due and were not in non-accrual status.

Provision/allowance for loan losses and impaired loans

Generally, the company has not recorded an allowance for loan losses as all loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. From time to time, the manager may deem it in the best interest of the company to agree to concessions to borrowers to facilitate a sale of collateral or refinance transactions primarily for secured loans in second lien position.

Activity in the allowance for loan losses for the six months ended June 30, 2021 and 2020, is presented in the following table.

	2021		2020
Balance January 1,	$	55,000	$	87,000
Recovery for loan losses		—		(75	)
Charge-offs		—		(31,925	)
Balance June 30,	$	55,000	$	55,000

Loans designated impaired and any associated allowance for loan losses is presented in the following table.

	June 30, 2021			December 31, 2020
Number of loans		5			6
Principal	$	4,915,741		$	7,529,684
Recorded investment(9)		5,167,636			7,895,605
Impaired loans without allowance		5,167,636			7,895,605
Impaired loans with allowance		—			—
Allowance for loan losses, impaired loans		—			—
Weighted average LTV at origination		60.2	%		52.5	%

(9) Recorded investment is the sum of the principal, advances, and accrued interest receivable for financial reporting purposes.

22

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Loans designated impaired had an average recorded investment, interest income recognized and interest income received in cash for the six months ended June 30, 2021 and the year ended December 31, 2020, as presented in the following table.

	June 30, 2021		December 31, 2020
Average recorded investment	$	6,531,621	$	6,307,655
Interest income recognized		48,186		704,506
Interest income received in cash		40,842		360,753

Fair Value

The following methods and assumptions are used when estimating fair value of secured loans.

Secured loans, performing and non-performing not designated as impaired (Level 3) - Each loan is reviewed quarterly for its delinquency, LTV adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors. Due to the nature of the company’s loans and borrowers, the fair value of loan balances secured by deeds of trust approximates the recorded amount (per the financial statements) due to the following:

• are of shorter terms at origination than commercial real estate loans by institutional lenders and conventional single-family home mortgage lenders;

• are written without a prepayment penalty causing uncertainty/a lack of predictability as to the expected duration of the loan; and

• have limited marketability and are not yet sellable into an established secondary market.

Secured loans, designated impaired (Level 3) - The fair value of secured loans designated impaired is the lesser of the fair value of the collateral or the enforceable amount of the note. Secured loans designated impaired are collateral dependent because it is expected that the primary source of repayment will not be from the borrower but rather from the collateral. The fair value of the collateral is determined on a nonrecurring basis by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions (Level 3 inputs). When the fair value of the collateral exceeds the enforceable amount of the note, the borrower is likely to redeem the note. Accordingly, third party market participants would generally pay the fair value of the collateral, but no more than the enforceable amount of the note.

The following methods and assumptions are used to determine the fair value of the collateral securing a loan.

Single family - Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison method. Management primarily obtains sale comps via its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed and adjusted for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built.

If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals.

Multi-family residential - Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in multi-family residential properties. Sales comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units by the number of bedrooms and bathrooms, square footage, condition, amenities and year built.

Management’s secondary method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method.  In order to determine market cap rates for properties of the same class and location as the subject, management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing project. When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial - Management’s preferred method for determining the fair value of its commercial buildings is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in commercial properties. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units, common areas, and year built.

23

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Management’s secondary method for valuing its commercial buildings is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project.

When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial land - Commercial land has many variations/uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land, including a determination of its highest and best use. Management may rely on information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal.

NOTE 5 – LINE OF CREDIT

In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. Activity involving the line of credit during the six months ended June 30, 2021 and 2020 is presented in the following table.

	2021			2020
Balance, January 1,	$	10,000,000		$	—
Draws		2,655,000			13,200,000
Repayments		(5,055,000	)		(5,000,000	)
Balance, June 30,	$	7,600,000		$	8,200,000
Line of credit - average daily balance	$	9,240,000		$	2,621,000

The company can borrow up to a maximum principal of $10 million subject to a borrowing base calculation pursuant to a credit and term loan agreement (the loan agreement) with a bank. Amounts under the loan agreement are secured by a first priority security interest in the notes and deeds of trust of the pledged loans in the borrowing base. The loan agreement matures in March 2022 when all amounts outstanding are then due. The company has the option at the maturity date to convert the then outstanding principal balance on the line of credit to a one-year term loan - for a fee of one-quarter of one percent (0.25%) – thereby extending the maturity date to March 2023.

Interest on the outstanding principal is payable monthly and accrues at the per annum rate of the greater of (i) five percent (5%) or (ii) the sum of the one-month LIBOR rate plus three and one-quarter percent (3.25%). If the company does not maintain the required compensating balance with a minimum daily average of $1.0 million for the calendar quarter, the interest rate automatically increases by one-quarter of one percent (0.25%) above that rate which would otherwise be applicable for the next calendar quarter retroactive to the beginning of the calendar quarter in which the compensating balance is not maintained. At June 30, 2021, the interest rate was five percent (5%).

For each calendar quarter during which the aggregate average daily outstanding principal is less than fifty percent (50%) of the maximum principal of $10 million, there is a quarterly unused line fee equal to one-half of one percent (0.50%) per annum of the average daily difference between the average principal outstanding and fifty percent (50%) of the maximum principal of $10 million ($5,000,000).

The loan proceeds are to be used exclusively to fund secured loans. The loan agreement provides for customary financial and borrowing base reporting by the company to the lending bank and specifies that the company shall maintain (i) minimum tangible net worth of $50 million, net of amounts due from related companies; (ii) debt service coverage ratio at all times of not less than 2.00 to 1.00; and (iii) loan payment delinquency of less than ten percent (10.0%) at calendar quarter-end, calculated as the principal of loans with payments over 61-days past due as determined by the lending bank’s guidance, less loan loss allowances, divided by total principal of the company’s loans. The loan agreement provides that in the event the loan payment delinquency rate exceeds 10.0% as of the end of any quarter, the bank will cease to make any further advances but agrees not to accelerate repayment of the loan.

At June 30, 2021 and December 31, 2020, aggregate principal of pledged loans was approximately $17,835,000 and $20,068,000, respectively with a maximum allowed advance thereon of approximately $10,000,000, subject to the borrowing base calculation.

24

REDWOOD MORTGAGE INVESTORS IX, LLC

Notes to Financial Statements

June 30, 2021 (unaudited)

Debt issuance costs of approximately $110,000 are being amortized over the two-year term of the line of credit agreement. Amortized debt issuance costs included in interest expense approximated $13,700 and $13,600 for the three months ended June 30, 2021 and 2020, and $27,400 and $13,600 for the six months ended June 30, 2021 and 2020 respectively.

NOTE 6 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN COMMITMENTS

Commitments

Note 3 (Manager and Other Related Parties) presents a detailed discussion of the company’s contractual obligations to RMC and scheduled redemptions of members’ capital at June 30, 2021.

Legal proceedings

As of June 30, 2021, the company is not involved in any legal proceedings other than those that would be considered part of the normal course of business. In the normal course of its business, the company may become involved in legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect the debt owed under the promissory notes, to enforce the provisions of the deeds of trust, to protect its interest in the real property subject to the deeds of trust and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions, in and of themselves, typically would be of any material financial impact to the net income or balance sheet of the company.

NOTE 7 – SUBSEQUENT EVENTS

The manager evaluated events occurring subsequent to June 30, 2021 and determined that there were no events or transactions occurring during this reporting period that require recognition or disclosure in the unaudited financial statements.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto, which are included in Item 1 of this report on Form 10-Q, as well as the audited financial statements and the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (or SEC). The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operations results to be expected for the full year.

Forward-Looking Statements

Certain statements in this Report on Form 10-Q which are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), including statements regarding the company’s expectations, hopes, intentions, beliefs and strategies regarding the future. Forward-looking statements, which are based on various assumptions (some of which are beyond our control), may be identified by reference to a future period or periods or by use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “possible” or similar terms or variations on those terms or the negative of those terms. Forward-looking statements include statements regarding trends in the California real estate market; future interest rates and economic conditions and their effect on the company and its assets; estimates as to the allowance for loan losses; forecasts of future sales and redemptions of units, forecasts of future funding of loans; loan payoffs and the possibility of future loan sales (and the gain thereon, net of expenses) to third parties, if any; forecasts of future financial support by the manager including the eventual elimination of financial support; future fluctuations in the net distribution rate; and beliefs relating to how the company will be affected by current economic conditions and trends in the financial and credit markets. Actual results may be materially different from what is projected by such forward-looking statements therefore, you should not place undue reliance on forward-looking statements, which reflect our view only as of the date hereof.

Factors that might cause such a difference include, but are not limited to, the following:

• changes in economic conditions, interest rates, and/or changes in California real estate markets;

• the impact of competition and competitive pricing for mortgage loans;

• the manager’s ability to make and arrange for loans that fit our investment criteria;

• whether we will have any future loan sales to unaffiliated third parties, and if we do, the gain, net of expenses, and the volume/timing of loan sales to unaffiliated third parties, which to date have provided only immaterial gains to us;

• the concentration of credit risks to which we are exposed;

• increases in payment delinquencies and defaults on our mortgage loans;

• the timing and dollar amount of the decreasing financial support from the manager and the corresponding impact on the net distribution rate to members;

• changes in government regulation and legislative actions affecting our business; and,

• the COVID-19 pandemic and social and governmental responses to the pandemic have caused, and are likely to continue to cause, severe economic, market and other disruptions worldwide. The extent to which COVID-19 and related actions impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with any degree of certainty. The ongoing ability of the company to meet its primary investment objectives and to generate funds for loans may be adversely affected by the COVID-19 pandemic and by the social and governmental responses and severe economic disruptions caused by the pandemic. As a result, we cannot at this time predict or estimate the impact of the COVID-19 pandemic, but it could have a material adverse effect on our business, financial condition, liquidity and results of operations for the remainder of 2021.

All forward-looking statements and reasons why results may differ included in this Form 10-Q are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ unless required by law.

Overview

Redwood Mortgage Investors IX, LLC (“we”, “RMI IX” or “the company”) is a Delaware limited liability company formed in October 2008 to engage in business as a mortgage lender and investor by making and holding-for-investment loans secured by California real estate, primarily through first and second deeds of trust. The company is externally managed. Redwood Mortgage Corp. (“RMC” or “the manager”) is the manager of the company. See Note 3 (Manager and Other Related Parties) to the financial statements included in Part I, Item 1 of this report for a detailed presentation of the company’s activities for which related parties are compensated and for other related party transactions.

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Cash generated from loan payoffs and borrower payments of principal and interest is used for operating expenses, distributions to members and unit redemptions. The cash flow, if any, in excess of these uses plus the cash from sale of DRIP units and advances on the line of credit is reinvested in new loans.

Redemptions are made once a quarter, on the last business day of the quarter. The maximum number of units that may be redeemed in any year and the maximum amount of redemption available in any period to members are subject to certain limitations. The company will not:

• in any calendar year, redeem more than 5%; or

• in any calendar quarter, redeem more than 1.25% of the weighted average number of units outstanding during the twelve (12) month period immediately prior to the date of the redemption.

In addition, the manager may, in its sole discretion, further limit the percentage of the total members’ units that may be redeemed or may adjust the timing of scheduled redemptions (including deferring withdrawals indefinitely), to the extent that such redemption would cause the company to be treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code or any Treasury Regulations promulgated thereunder (determined without reference to Code Section 469(i)).

In the event that redemption requests in excess of the foregoing limitations are received by the manager, such redemption requests will be honored in the following order of priority:

• first, to redemptions upon the death of a member; and

• next, to other redemption requests until all other requests for redemption have been met.

All redemption requests shall be honored on a pro rata basis, based on the amount of redemption requests received in the preceding quarter plus unfulfilled redemption requests that the company was unable to honor in prior quarter(s).

See Note 1 (Organization and General) to the financial statements included in Part I, Item 1 of this report for additional detail on the organization and operations of RMI IX which detail is incorporated by this reference into this Item 2.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate owned, at acquisition and subsequently. Actual results could differ significantly from these estimates.

Accounting policies are an integral part of our financial statements. For a summary of our critical accounting policies, see “Critical Accounting Policies” in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2020.

There have been no material changes to our critical accounting policies since our annual report on Form 10-K.

Results of Operations

The following discussion describes our results of operations for the three and six months ended June 30, 2021. While the COVID-19 pandemic has not had a material adverse effect on our reported results for our first or second quarter, we are actively monitoring the impact of COVID-19, which may negatively impact our business, financial condition, liquidity and results of operations for subsequent periods.

The extent of the impact of the COVID-19 pandemic in 2021 and beyond on the company’s capital, liquidity, and other financial positions and on the company’s business, results of operation and prospects, will depend on a number of evolving factors, including:  

• COVID-19 has not yet been contained and could continue to affect more households and businesses. The potential exists for variants of the virus and resurgence to occur.

• The accelerating distribution of vaccines for the virus appear to be having a positive impact on businesses and the economy; however, there is no way to predict when or if an economic recovery from the pandemic will occur and if such a recovery will be sustained over time. National, California and local economies and real estate markets could suffer further disruptions that are lasting and may impact the ability of the borrowers to make loan payments or to otherwise perform in accordance with their loan terms.

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• Loans secured by rental properties may be adversely impacted by government regulations allowing rent payment delays, rent reductions, and changes in timing of rent payments, as well as restrictions or moratoriums on evictions enacted by federal, state or local authorities to address the impacts of COVID-19.

• The ability to enforce loan terms through foreclosure may be adversely affected by limitations or moratoriums on foreclosures enacted by state or local authorities to address the impacts of COVID-19.

• Key personnel of the manager may become incapacitated by the COVID-19 virus adversely impacting the business.

RMC continues to monitor the impact the COVID-19 pandemic is having and may have on California real estate values. See Note 1 (Organization and General) to the financial statements included in Part I, Item 1 of this report for additional detail on the COVID-19 pandemic, the social and governmental responses thereto and the severe economic disruptions caused by the pandemic, which detail is incorporated by this reference into this Item 2.

General economic and real estate market conditions – California

All of our mortgage loans are secured by California real estate. Our secured-loan investment activity and the value of the real estate securing our loans is dependent significantly on economic activity and employment conditions in California. Wells Fargo’s Economics Group periodically provides timely, relevant information and analysis in its reports and commentary regarding California’s employment and economic conditions. Highlights from a recently issued report from Wells Fargo Securities Economics Group is presented below.

In the publication “California Posts Robust Payroll Gain in June” dated July 16, 2021:

Labor Shortages Are Holding Back an Even Stronger Pace of Hiring

• Nonfarm employers added 73,500 net new jobs during June, the second largest gain of any state.

• While the monthly gain was impressive, the pace of payroll growth has moderated a touch recently alongside widespread labor shortages.

• The leisure & hospitality sector accounted for the lion's share of the total gain, adding 44,400 new jobs. Within leisure & hospitality, hiring at hotels, bars and restaurants rose by 37,000.

• Health care & social assistance, which includes nursing homes and child daycare centers, expanded headcounts by 7,700, while retailers added 2,500.

• Professional & business services payrolls increased by 3,400 jobs, thanks to a 3,200 improvement in administrative & waste services.

• Transportation, warehousing & utilities employment rose by 1,400. Although the number of ships waiting to anchor remains elevated, congestion at the Port of Los Angeles/Long Beach appears to be clearing up a bit. This is a sign that the supply chain bottlenecks affecting virtually every industry may be starting to ease.

• Manufacturing payrolls advanced by 4,200, marking the fifth consecutive monthly gain.

• Construction firms once again trimmed headcounts, as payrolls declined by 3,000.

• The state's unemployment rate was unchanged at 7.7%, although May's jobless rate was revised down from [SIC] 7.7% from 7.9%. This time last year, the unemployment rate was 14.1%, a reminder that while progress has been slow, a great deal of improvement has occurred over the past 12 months.

• Drought conditions continue to worsen as the summer wears on. The assessment of conditions in over 33% of California has recently been elevated to an "exceptional" classification (the most severe). Increasingly dire drought conditions are fueling an increase in wildfires, straining water resources and threatening the state's massive agricultural industry.

Hiring remains robust in the Golden State. Employers added 73,500 net new jobs during June, the second largest gain of any state. While the monthly gain was impressive, the pace of payroll growth has cooled down slightly. While employers have expanded payrolls every month since February, the total gains have been shrinking with each consecutive month. There are several reasons why job growth has slightly moderated, but widespread labor shortages stand out as the driving factor. Put another way, if businesses could find the labor they needed, employment growth could be much stronger.

Leisure & hospitality accounted for the lion's share of the total gain in June, adding 44,400 new jobs. Within leisure & hospitality, hiring at hotels, bars and restaurants rose by 37,000, while arts, entertainment & recreation added 7,400 jobs. According to Visit California [https://industry.visitcalifornia.com/research/travel-forecast] travel spending in the state dropped to $65.1 billion in 2020—only 45% of 2019 spending levels. This year is shaping up to be much better. Travel and tourism is quickly ramping up across the state, most notably in Southern California. Hotel occupancy rates in Los Angeles and San Diego are still below the levels seen in the summer of 2019 but are steadily climbing higher. The ramp up in tourism appears to be providing a boost to the entire Southern California economy. During June, overall employment rose solidly in San Diego and Anaheim, while employers in Los Angeles added 29,700 total jobs, more than other metro in the state.

28

The Bay Area saw more modest gains during the month. San Francisco businesses increased headcounts by 11,900, while San Jose added just 2,700 jobs. Statewide, hiring in the tech industry advanced, but only slightly. Professional & business services payrolls increased by 3,400 jobs, largely due to a 3,200 improvement in administrative & waste services. California's professional, scientific & technical services industry payrolls were largely unchanged, while information sector payrolls edged up by 500 jobs.

Elsewhere, health care & social assistance expanded headcounts by 7,700, while retailers added 2,500. Manufacturing payrolls advanced by 4,200, the fifth consecutive monthly gain, while transportation, warehousing & utilities employment rose by 1,400 jobs. Although the number of ships waiting to anchor remains elevated, congestion at the Port of Los Angeles/Long Beach appears to be clearing somewhat. This is a sign that the supply chain bottlenecks affecting virtually every industry may be beginning to ease. Construction firms once again trimmed headcounts in June, as payrolls declined by 3,000, the third straight monthly drop. While residential construction remains strong, nonresidential activity looks to be waning amid a thinning backlog of new projects.

The state's unemployment rate was unchanged at 7.7%, although May's jobless rate was revised down from 7.7% from 7.9%. This time last year, the unemployment rate was 14.1%, a reminder that while progress has been slow, a great deal of improvement has occurred over the past 12 months. The state's labor market appears poised for improvement in coming months. Jobless claims remain elevated relative to their pre-COVID norms, but continue to trend lower, which suggests fewer layoffs are taking place. The $300 federal unemployment benefit will end in September, which will likely boost labor force participation and nonfarm payrolls, although it may take a few months for the those [SIC] effects to become apparent in the employment data.

While California's economy remains firmly on the path to recovery, worsening drought conditions are increasingly a risk. The assessment of conditions in over 33% of California have recently been elevated to an "exceptional" classification (the most severe). Increasingly dire drought conditions are fueling an increase in wildfires, straining water resources and threatening the state's massive agricultural industry. The rising number of COVID cases is another risk, although hospitalizations are not rising anywhere near as much as infections. We are seeing some restrictions being reinstated, but not in a way that would derail California's economic recovery.

29

Key Performance Indicators

Key performance indicators as of and for the six months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Secured loans principal – end of period balance	$	79,876,199		$	72,577,049
Secured loans principal– average daily balance		82,217,000			69,809,000
Interest income	$	3,384,828		$	2,939,676
Portfolio interest rate(1)		8.6	%		8.8	%
Effective yield rate(2)		8.2	%		8.4	%
Line of credit - end of period balance	$	7,600,000		$	8,200,000
Line of credit - average daily balance(3)	$	9,240,000		$	2,621,000
Interest expense	$	259,680		$	46,744
Interest rate - line of credit(3)		5.0	%		5.0	%
Provision for (recovery of) loan losses	$	—		$	(75	)
Total operations expense(8)	$	927,795		$	660,405
Net income(8)	$	2,230,118		$	2,245,604
Percent of average members’ capital(4)(5)		5.5	%		5.4	%
Member distributions, net	$	2,244,994		$	2,246,645
Percent of average members’ capital(4)(6)		5.6	%		5.5	%
Members’ capital, gross – end of period balance	$	79,043,284		$	81,547,630
Members’ capital, gross – average daily balance	$	80,498,000		$	81,952,000
Member redemptions(7)	$	2,700,057		$	1,186,689

(1) Stated note interest rate, weighted daily average (annualized).

(2) Percent of secured loans – average daily balance (annualized).

(3) In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. See Note 5 (Line of Credit) to the financial statements included in Part 1, Item 1 of this report for a presentation of the activity and discussion of the terms and condition of the loan agreement.

(4) Percent of members’ capital, gross – average daily balance (annualized).

(5) Percent based on the net income available to members (excluding 1% allocated to manager).

(6) Members Distributions is net of O&O expenses allocated to members’ accounts during the year.

(7) At June 30, 2021, scheduled redemptions of members' capital were $1,205,307 of which $944,301 is payable in 2021, and $261,006 is payable in 2022. Scheduled redemptions of $141,008 are subject to early withdrawal penalties.

(8) RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income), which increased the net income, cash available for distribution, and the net-distribution rate. See Note 3 (Manager and Other Related Parties) to the financial statements included in Part 1, Item 1 of this report for a detailed discussion of fees and cost reimbursements to which the manager is entitled.

30

Key performance indicators as of and for the three months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Secured loans principal – end of period balance	$	79,876,199		$	72,577,049
Secured loans principal– average daily balance		80,830,000		$	72,577,000
Interest income	$	1,705,119		$	1,511,999
Portfolio interest rate(1)		8.6	%		8.7	%
Effective yield rate(2)		8.4	%		8.3	%
Line of credit - end of period balance	$	7,600,000		$	8,200,000
Line of credit - average daily balance(3)	$	8,685,000		$	2,621,000
Interest expense	$	123,469		$	46,744
Interest rate - line of credit(3)		5.0	%		5.0	%
Provision for (recovery of) loan losses	$	—		$	—
Total operations expense(8)	$	426,334		$	337,158
Net income(8)	$	1,178,712		$	1,133,051
Percent of average members’ capital(4)(5)		5.8	%		5.5	%
Member distributions, net	$	1,118,603		$	1,115,768
Percent of average members’ capital(4)(6)		5.6	%		5.4	%
Members’ capital, gross – end of period balance	$	79,043,284		$	81,547,630
Members’ capital, gross – average daily balance	$	80,187,000		$	82,001,000
Member redemptions(7)	$	1,773,550		$	698,527

(1) Stated note interest rate, weighted daily average (annualized).

(2) Percent of secured loans – average daily balance (annualized).

(3) In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. See Note 5 (Line of Credit) to the financial statements included in Part 1, Item 1 of this report for a presentation of the activity and discussion of the terms and condition of the loan agreement.

(4) Percent of members’ capital, gross – average daily balance (annualized).

(5) Percent based on the net income available to members (excluding 1% allocated to manager).

(6) Members Distributions is net of O&O expenses allocated to members’ accounts during the year.

(7) At June 30, 2021, scheduled redemptions of members' capital were $1,205,307 of which $944,301 is payable in 2021, and $261,006 is payable in 2022. Scheduled redemptions of $141,008 are subject to early withdrawal penalties.

(8) RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income), which increased the net income, cash available for distribution, and the net-distribution rate. See Note 3 (Manager and Other Related Parties) to the financial statements included in Part 1, Item 1 of this report for a detailed discussion of fees and cost reimbursements to which the manager is entitled.

Secured loans

The secured loans principal at June 30, 2021 of $79,876,199 was an increase of approximately 10% ($7.3 million) over the June 30, 2020 secured loans principal of $72,577,049. The increase was primarily due to RMC’s ability to fully invest the capital available to lend, including in 2021 the advances on the line of credit.

We have sought to exercise strong discipline in underwriting loan applications and lending against collateral at amounts that create a secured loan portfolio that has substantial protective equity (i.e., property value to outstanding debt) as indicated by the overall conservative weighted average loan-to-value ratio (LTV) which at June 30, 2021 was approximately 55.7%. Thus, per the appraisal-based valuations at the time of loan inception, borrowers have, in the aggregate, equity of 44.3% in the property, and we as a lender have lent in the aggregate 55.7% (including other senior liens on the property) against the properties we hold as collateral for the repayment of our loans.

31

Secured loans, principal by LTV and lien position at June 30, 2021 are presented in the following table. The LTVs shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

	Secured loans, principal
LTV(1)	First trust deeds		Percent			Second trust deeds		Percent			Total principal		Percent
<40%	$	6,159,006		7.8	%	$	2,647,866		3.3	%	$	8,806,872		11.1	%
40-49%		6,818,157		8.5			649,417		0.8			7,467,574		9.3
50-59%		20,220,640		25.3			2,170,198		2.7			22,390,838		28.0
60-69%		29,593,626		37.0			5,838,266		7.3			35,431,892		44.3
Subtotal <70%		62,791,429		78.6			11,305,747		14.1			74,097,176		92.7
70-79%		4,529,023		5.7			1,250,000		1.6			5,779,023		7.3
Subtotal <80%		67,320,452		84.3			12,555,747		15.7			79,876,199		100.0
≥80%		—		0.0			—		0.0			—		0.0
Total	$	67,320,452		84.3	%	$	12,555,747		15.7	%	$	79,876,199		100.0	%

(1) LTV classifications in the table above are based on the company’s recorded investment in the loan.

Non-performing secured loans, principal by LTV and lien position at June 30, 2021 are presented in the following table. The LTVs shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

	Non-performing secured loans, principal
LTV(2)	First trust deeds		Percent(3)			Second trust deeds		Percent(3)			Total		Percent(3)
<40%	$	541,595		0.7	%	$	—		0.0	%	$	541,595		0.7	%
40-49%		190,198		0.2			—		0.0			190,198		0.2
50-59%		6,968,500		8.7			188,261		0.2			7,156,761		8.9
60-69%		2,939,486		3.7			1,786,057		2.2			4,725,543		5.9
Subtotal <70%		10,639,779		13.3			1,974,318		2.4			12,614,097		15.7
70-79%		—		0.0			—		0.0			—		0.0
Subtotal <80%		10,639,779		13.3			1,974,318		2.4			12,614,097		15.7
≥80%		—		0.0			—		0.0			—		0.0
Total	$	10,639,779		13.3	%	$	1,974,318		2.4	%	$	12,614,097		15.7	%

(2) LTV classifications in the table above are based on the company’s recorded investment in the loan.

(3) Percent of secured loans principal, end of period balance

Payments in arrears at June 30, 2021 for non-performing secured loans, (i.e., principal and interest payments past due 30 or more days) totaled approximately $9,183,000, of which approximately $8,713,000 was principal and approximately $470,000 was accrued interest.

See Note 4 (Loans) to the financial statements included in Part I, Item 1 of this report for detail of the secured loan portfolio, including loan characteristics, scheduled maturities, delinquency and payments in arrears, loans in non-accrual status and the allowance for loan losses, which presentations are incorporated by this reference into this Item 2.

Performance overview/net income 2021 v. 2020

Net income available to members as a percent of members’ capital, gross – average daily balance (annualized) was 5.5% and 5.4% for the six months ended June 30, 2021 and 2020, respectively. Net income decreased approximately $15,500 (0.7%) for the six months ended June 30, 2021 as compared to the same period in 2020 due to an increase in operations expense of approximately $267,400 (40.5%), which was offset in part by an increase in net interest income of $232,200 (8.0%).

Members’ capital at June 30, 2021 of $79,043,284 was a decrease of approximately $2,504,300 (3.1%) from June 30, 2020, as members’ redemptions exceeded the purchase of DRIP units.

32

Analysis and discussion of income from operations 2021 v. 2020 (six months ended)

Significant changes to net income for the six months ended June 30, 2021 and 2020 are summarized in the following table.

	Net interest income			Provision for (recovery of) loan losses			Operations expense			Net income
Six months ended
June 30, 2021	$	3,125,148			—			927,795		$	2,230,118
June 30, 2020		2,892,932			(75	)		660,405			2,245,604
Change	$	232,216			75			267,390		$	(15,486	)
Change
Increase secured loans principal - average daily balance	$	499,775			—			17,629		$	482,146
Effective yield rate		(54,623	)		—			—			(54,623	)
Increase members' capital - average daily balance		—			—			35,138			(35,138	)
Interest on line of credit		(199,152	)		—			—			(199,152	)
Amortization of debt issuance costs		(13,784	)		—			—			(13,784	)
Late fees		—			—			—			19,763
Decrease in allocable expenses from RMC		—			—			(8,000	)		8,000
RMC fees/costs reimbursements collected		—			—			123,262			(123,262	)
Tax compliance cost efficiency		—			—			(25,830	)		25,830
Expanded legal and audit services		—			—			75,846			(75,846	)
Timing of services rendered		—			—			11,867			(11,867	)
Independent contractors		—			—			23,244			(23,244	)
Other		—			75			14,234			(14,309	)
Change	$	232,216			75			267,390		$	(15,486	)

The table above presents only the significant changes to net income for the period, and is not intended to cross-foot.

Net interest income

Net interest income increased approximately $232,200 for the six months ended June 30, 2021 compared to the same period in 2020, resulting from the increase in the average daily balance of secured loans – principal of approximately $12.4 million (17.8%), offset in part by an increase in interest expense of $212,900 (455.5%) as the line of credit was utilized with an average daily balance of approximately $9.2 million for the six months ended June 30, 2021 as compared to $2.6 million for the six months ended June 30, 2020 and was not utilized until April 2020.

Foregone interest on non-accrual loans at June 30, 2021 was $239,583, an increase of approximately $95,000 compared to June 30, 2020.

Provision/allowance for loan losses

Generally, the company has not recorded a provision/allowance for loan losses as the secured loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. There were no additions or charge-offs to the provision for loan losses during the six months ended June 30, 2021. During the six months ended June 30, 2020, there was approximately $32,000 in charge-offs to the allowance in relation to a loan in second lien position to facilitate the sale of the underlying collateral which was sold in February 2020.

33

Operations expense

Significant changes to operations expense for the six months ended June 30, 2021 and 2020 are summarized in the following table.

	Mortgage servicing fees		Asset management fees		Costs from RMC, net			Professional services			Other		Total
Six months ended
June 30, 2021	$	103,960		282,780		144,262			374,095			22,698	$	927,795
June 30, 2020		86,331		270,642		—			296,085			7,347		660,405
Change	$	17,629		12,138		144,262			78,010			15,351	$	267,390
Change
Increase secured loans principal - average daily balance	$	17,629		—		—			—			—	$	17,629
Increase members' capital - average daily balance		—		12,138		23,000			—			—		35,138
Decrease in allocable expenses from RMC		—		—		(8,000	)		—			—		(8,000	)
RMC fees/costs reimbursements collected		—		—		123,262			—			—		123,262
Tax compliance cost efficiency		—		—		—			(25,830	)		—		(25,830	)
Expanded legal and audit services		—		—		—			75,846			—		75,846
Timing of services rendered		—		—		—			11,867			—		11,867
Independent contractors		—		—		—			23,244			—		23,244
Other		—		—		6,000			(7,117	)		15,351		14,234
Change	$	17,629		12,138		144,262			78,010			15,351	$	267,390

Mortgage Servicing fees

The increase in mortgage servicing fees of $17,629 for the six months ended June 30, 2021 as compared to the same period in 2020 was due to the increase in the average daily balance - secured loans of $12.4 million, at the annual rate of 0.25%.

Asset management fees

The increase in asset management fees of $12,138 is due to an increase in the members capital base calculation balance at December 31, 2020 compared to December 31, 2019. The current year asset management fee is determined annually based on prior year end balances and is computed by subtracting from the then fair value of the company’s loans plus working capital reserves, an amount equal to the outstanding debt.

Costs from RMC, net

In the six months ended June 30, 2021, RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income). For periods prior to the third quarter of 2020, RMC had waived all reimbursement for the cost of services attributable to RMI IX. The reimbursement of costs from RMC waived was $160,434 and $290,814 in the six months ended June 30, 2021 and 2020, respectively.

The amount of qualifying costs attributable to RMI IX incurred by RMC was $304,696 and $290,814 in the six months ended June 30, 2021 and 2020, respectively. The increase was primarily due to an increase in the company’s members’ capital as a percent of the total capital of the related mortgage funds managed by RMC, offset in part by a decrease in allocable payroll and professional services year over year.

34

Professional Services

Professional services consist primarily of information technology, legal, audit and tax compliance, and consulting expenses.

The increase in professional services of approximately $78,000 for the six months ended June 30, 2021 compared to the same period in 2020 was due primarily to:

- Audit and legal fees increased by approximately $76,000 in the six months ended June 30, 2021 as compared to the same period in 2020 due to expanded legal and audit services associated with COVID-19, the line of credit agreement, loan transactions and valuation of loan collateral.

- Consulting/contractor fees increased approximately $23,000 principally due to additional consulting and contractor time incurred as a result of the resignation of a key accounting team member due to personal circumstances during the first quarter of 2021.

- Tax compliance costs decreased by approximately $26,000 as a result of process efficiency implemented in 2021.

Analysis and discussion of income from operations 2021 v. 2020 (three months ended)

Significant changes to net income for the three months ended June 30, 2021 and 2020 are summarized in the following table.

	Net interest income			Provision for (recovery of) loan losses		Operations expense			Net income
Three months ended
June 30, 2021	$	1,581,650			—		426,334		$	1,178,712
June 30, 2020		1,465,255			—		337,158			1,133,051
Change	$	116,395			—		89,176		$	45,661
Change
Increase secured loans principal - average daily balance	$	168,072			—		7,930		$	160,142
Effective yield rate		25,048			—		—			25,048
Increase members' capital - average daily balance		—			—		15,069			(15,069	)
Interest on line of credit		(76,642	)		—		—			(76,642	)
Amortization of debt issuance costs		(83	)		—		—			(83	)
Late fees		—			—		—			18,442
Increase in allocable expenses from RMC		—			—		12,000			(12,000	)
RMC fees/costs reimbursements collected		—			—		58,466			(58,466	)
Tax compliance cost efficiency		—			—		(25,830	)		25,830
Expanded legal and audit services		—			—		16,937			(16,937	)
Independent contractors		—			—		7,155			(7,155	)
Other		—			—		(2,551	)		2,551
Change	$	116,395			—		89,176		$	45,661

The table above presents only the significant changes to net income for the period, and is not intended to cross-foot.

Net interest income

Net interest income increased approximately $116,400 (7.9%) for the three months ended June 30, 2021 compared to the same period in 2020, resulting from the increase in the average daily balance of secured loans – principal of approximately $8.3 million (11.4%), offset in part by an increase in interest expense of $76,700 (164.1%) as the line of credit was utilized with an average daily balance of approximately $8.7 million for the three months ended June 30, 2021 as compared to $2.6 million for the three months ended June 30, 2020.

Provision/allowance for loan losses

Generally, the company has not recorded a provision/allowance for loan losses as the secured loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. There were no additions or charge-offs to the provision for loan losses during the three months ended June 30, 2021 and 2020.

35

Operations expense

Significant changes to operations expense for the three months ended June 30, 2021 and 2020 are summarized in the following table.

	Mortgage servicing fees		Asset management fees		Costs from RMC, net		Professional services			Other		Total
Three months ended
June 30, 2021	$	51,988		141,390		79,466		141,408			12,082	$	426,334
June 30, 2020		44,058		135,321		—		150,499			7,280		337,158
Change	$	7,930		6,069		79,466		(9,091	)		4,802	$	89,176
Change
Increase secured loans principal - average daily balance	$	7,930		—		—		—			—	$	7,930
Increase members' capital - average daily balance		—		6,069		9,000		—			—		15,069
Increase in allocable expenses from RMC		—		—		12,000		—			—		12,000
RMC fees/costs reimbursements collected		—		—		58,466		—			—		58,466
Tax compliance cost efficiency		—		—		—		(25,830	)		—		(25,830	)
Expanded legal and audit services		—		—		—		16,937			—		16,937
Independent contractors		—		—		—		7,155			—		7,155
Other		—		—		—		(7,353	)		4,802		(2,551	)
Change	$	7,930		6,069		79,466		(9,091	)		4,802	$	89,176

Mortgage Servicing fees

The increase in mortgage servicing fees of $7,930 for the three months ended June 30, 2021 as compared to the same period in 2020 was due to the increase in the average daily balance - secured loans of $8.3 million, at the annual rate of 0.25%.

Asset management fees

The increase in asset management fees of $6,069 is due to an increase in the members capital base calculation balance at December 31, 2020 compared to December 31, 2019. The current year asset management fee is determined annually based on prior year end balances and is computed by subtracting from the then fair value of the company’s loans plus working capital reserves, an amount equal to the outstanding debt.

Costs from RMC, net

In the three months ended June 30, 2021, RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income). For periods prior to the third quarter of 2020, RMC had waived all reimbursement for the cost of services attributable to RMI IX. The reimbursement of costs from RMC waived was $79,060 and $138,098 in the three months ended June 30, 2021 and 2020, respectively.

The amount of qualifying costs attributable to RMI IX incurred by RMC was $158,526 and $138,098 in the three months ended June 30, 2021 and 2020, respectively. The increase was due to an increase in allocable payroll and professional services in the quarter, accompanied by an increase in the company’s members’ capital as a percent of the total capital of the related mortgage funds managed by RMC.

Professional Services

Professional services consist primarily of information technology, legal, audit and tax compliance, and consulting expenses.

The decrease in professional services of approximately $9,000 for the three months ended June 30, 2021 compared to the same period in 2020 was due primarily to a reduction of tax compliance costs as a result of process efficiency implemented in 2021, which was partially offset by expanded legal and audit services associated with COVID-19, the line of credit agreement, loan transactions and valuation of loan collateral.

36

Members' capital, cash flows and liquidity

Cash flows by business activity for the six months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Members’ capital
Earnings distributed to members, net of DRIP	$	(1,111,711	)	$	(1,083,849	)
Redemptions, net		(2,689,428	)		(1,164,756	)
Organization and offering expenses received, net		53,241			20,861
Formation loan		238,312			—
Cash – members’ capital, net		(3,509,586	)		(2,227,744	)
Borrowings
Line of credit advances, net		(2,400,000	)		8,200,000
Interest paid		(237,118	)		(24,028	)
Debt issuance costs paid		—			(109,526	)
Cash – borrowings, net		(2,637,118	)		8,066,446
Cash - members' capital and borrowings, net		(6,146,704	)		5,838,702
Loan principal/advances/interest
Loans funded & advances, net		(18,391,008	)		(21,974,416	)
Principal collected		19,903,312			22,335,694
Loan transferred from related mortgage fund		(4,671,760	)		(2,296,677	)
Loans transferred to related mortgage funds		2,559,588			—
Loans sold to non-affiliate		2,988,268			—
Interest received, net		3,510,328			2,937,891
Late fees		113,709			13,002
Cash – loans, net		6,012,437			1,015,494
Operations expense		(965,798	)		(642,691	)
Net change in cash	$	(1,100,065	)	$	6,211,505
Cash, end of period	$	1,199,048		$	10,662,034

Redemptions of members capital

Redemptions of members’ capital for the three and six months ended June 30, 2021 and 2020 are presented in the following table.

	Three months ended				Six months ended
Redemptions	2021		2020		2021		2020
Without penalty	$	1,682,981	$	444,922	$	2,432,327	$	762,594
With penalty		90,569		253,605		267,730		424,095
Total	$	1,773,550	$	698,527	$	2,700,057	$	1,186,689
Early withdrawal penalties	$	2,311	$	12,200	$	10,627	$	21,933

At June 30, 2021, scheduled redemptions of members' capital were $1,205,307 of which $944,301 is payable in 2021, and $261,006 is payable in 2022. Scheduled redemptions of $141,008 are subject to early withdrawal penalties.

Borrowings

In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. For the six months ended June 30, 2021, the line of credit had an average daily balance of approximately $9.2 million. At June 30, 2021, the balance was $7,600,000. See Note 5 (Line of Credit) to the financial statements included in Part I, Item 1 of this report for a detailed presentation of the activity and discussion on the terms and provisions of the loan agreement, which presentation is incorporated by this reference into this Item 2.

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Contractual obligations and commitments

At June 30, 2021, the company had no construction or rehabilitation loans outstanding, no loan commitments pending, and no off-balance sheet arrangements as such arrangements are not permitted by the Operating Agreement. Note 3 (Manager and Other Related Parties) to the financial statements included in Part I, Item 1 of this report presents detailed discussion of the company’s contractual obligations to RMC.

Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not included because the company is a smaller reporting company.

Item 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The company is externally managed by RMC. The manager is solely responsible for managing the business and affairs of the company, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the company. RMC provides the personnel and services necessary for us to conduct our business, as we have no employees of our own.

As a limited liability company, RMI IX does not have a board of directors, nor, therefore, do we have an audit committee of the board of directors. The manager, however, provides the equivalent functions of a board of directors and of an audit committee for, among other things, the following purposes:

• Appointment; compensation, and review and oversight of the work of our independent public accountants; and

• establishing and maintaining internal controls over our financial reporting.

RMC, as the manager, carried out an evaluation, with the participation of RMC's President (acting as principal executive officer/principal financial officer) of the effectiveness of the design and operation of the manager's controls and procedures over financial reporting and disclosure (as defined in Rule 13a-15 of the Exchange Act) as of and for the period covered by this report. Based upon that evaluation, RMC's principal executive officer/principal financial officer concluded, as of the end of such period, that the manager's disclosure controls and procedures were effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in our reports that we file or submit under the Exchange Act.

Changes to Internal Control Over Financial Reporting

There have not been any changes in internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, the manager’s or company’s internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

As of June 30, 2021, the company is not involved in any legal proceedings other than those that would be considered part of the normal course of business. In the normal course of business, the company may become involved in various legal proceedings such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc. to enforce the provisions of the deeds of trust, collect the debt owed under the promissory notes or protect or recoup its investment from the real property secured by the deeds of trust and to resolve disputes between borrowers, lenders, lien holders and mechanics. None of these actions typically would be of any material importance.

Item 1A. Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

There were no sales of securities by the company which were not registered under the Securities Act of 1933.

Use of Proceeds from Registered Securities

On May 9, 2019, the company filed a Registration Statement on Form S-3 with the SEC (SEC File No. 333-231333) to offer up to 15,000,000 units ($15,000,000) to members of record as of April 30, 2019 that had previously elected to participate in the DRIP or that elect to participate in the DRIP in those states in which regulatory approval has been obtained. The Registration Statement on Form S-3 became effective on May 9, 2019.

As of June 30, 2021, the gross proceeds from sales of units to our members under our DRIP pursuant to the May 9, 2019 Form S-3 Registration Statement (after May 9, 2019) was approximately $5,051,000.

The units have been registered pursuant to Section 12(g) of the Exchange Act. Such registration of the units, along with the satisfaction of certain other requirements under ERISA, enables the units to qualify as “publicly-offered securities” for purposes of ERISA and regulations issued thereunder. By satisfying those requirements, the underlying assets of the company should not be considered assets of a “benefit plan investor” (as defined under ERISA) by virtue of the investment by such benefit plan investor in the units.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit No.	Description of Exhibits
10.1	Business Loan Agreement; Promissory Note dated March 13, 2020; Pledge and Security Agreement
10.2	Promissory Note; Pledge and Security Agreement dated September 30, 2020
10.3	Promissory Note; Pledge and Security Agreement dated October 14, 2020
31.1	Certification of Manager pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Manager pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*	Inline XBRL Taxonomy Extension Schema Document
101.CAL*	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	REDWOOD MORTGAGE INVESTORS IX, LLC
	(Registrant)
Date:  August 16, 2021	By:	Redwood Mortgage Corp., Manager
		By:	/s/ Michael R. Burwell
		Name:	Michael R. Burwell
		Title:	President, Secretary and Treasurer
			(On behalf of the registrant, and in the capacity of principal financial officer)

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EX-10.1

Exhibit 10.1

BUSINESS LOAN AGREEMENT

(REVOLVING LINE OF CREDIT AND TERM LOAN AGREEMENT)

This Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement) (this “Agreement”) is made as of March 13, 2020, by and between REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company (“Borrower”), and WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”):

A. Borrower is engaged in the business of originating real estate loans to third-party borrowers.

B. Borrower has applied to Lender for credit in an amount not to exceed the principal sum of Ten Million and No/100 Dollars ($10,000,000.00).

C. Lender has agreed to extend credit to Borrower upon and subject to all covenants, terms, and conditions hereinafter provided.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1.

DEFINITIONS.

The definitions set forth in the Recitals are incorporated herein by reference. Capitalized terms not defined in this Agreement have the meanings given them in the California Uniform Commercial Code. For purposes of this Agreement, the following terms shall have the following meanings:

“Adjusted Tangible Net Worth” means, as of any date of determination, for any Person, the Net Worth of such Person minus: (a) all Consolidated Assets of such Person which would be classified as intangible assets under GAAP, including but not limited to goodwill (whether representing the excess cost over book value of assets acquired or otherwise), patents, trademarks, trade names, copyrights, franchises, and deferred charges; and (b) all amounts due from related companies.

“Advance” means any advance or disbursement of Loan Proceeds pursuant to this Agreement.

“Agreement” means this Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement), as originally executed or as it may be modified, supplemented, extended, renewed or amended from time to time.

“Affiliate” means with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, into which the Persons is merged, or which acquires all or substantially all of the assets of the Person.

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“Allonge” means an attachment securely affixed to a Collateral Loan Note (and included in the Collateral Loan Document Package) containing the endorsement by Borrower of the Collateral Loan Note to Lender, substantially in the form attached hereto as Exhibit A and incorporated herein by this reference.

“Anti-Money Laundering Laws” means the USA Patriot Act of 2001, the Bank Secrecy Act, as amended through the date hereof, Executive Order 1 3324—Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended through the date hereof, and other federal laws and regulations and executive orders administered by OFAC which prohibit, among other things, the engagement in transactions with, and the provision of services to, certain foreign countries, territories, entities and individuals (such individuals include specially designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanction and embargo programs), and such additional laws and programs administered by OFAC which prohibit dealing with individuals or entities in certain countries regardless of whether such individuals or entities appear on any of the OFAC lists.

“Appraisal” means an appraisal of the Underlying Collateral, or such other report reasonably acceptable to Lender, performed and prepared by a duly licensed or certified appraiser and possessing all qualifications required by applicable Laws, setting forth the appraiser’s opinion and determination of the fair market value of the Underlying Collateral; said Appraisal shall meet all requirements and approaches to value as shall be necessary or appropriate in order to comply with all customary and generally accepted appraisal standards within the appraisal industry and in accordance with Lender’s reasonable requirements, and all applicable Laws governing Lender’s operations (including, but not limited to, the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), and Uniform Standards of Professional Appraisal Practice (USPAP).

“Assets” has the meaning usually given that term in accordance with GAAP, including subordinated debts owed by a Person to holders of equity in the Person if the Person is a business entity, but excluding sums due to the Person from Affiliates.

“Assignment of Deed of Trust” means each Collateral Assignment of Deed of Trust and Related Documents executed and delivered by Borrower to Lender in connection with any Collateral Loan to be secured by real property and included in the Collateral Loan Document Package, substantially in the form attached hereto as Exhibit B and incorporated herein by this reference (with such modifications to such form as may be required in order for such form to be recorded in the real property records of the applicable jurisdiction).

“Authorized Person” means any person duly authorized by a general borrowing resolution of the Borrower, or in the absence of such a resolution, board minutes. As of the date hereof, the following persons currently, individually or collectively, are authorized to request Advances and authorize payments until the Lender receives from the Borrower, at the Lender’s address, written notice of revocation of their authority: Michael R. Burwell or Lorene (“Lori”) Randich.

“Availability” means the lesser of (a) the Credit Limit and (b) the Borrowing Base.

2

“Borrower’s knowledge” “knowledge of Borrower” and all other references to the “knowledge” or “awareness” of Borrower shall mean the actual knowledge of any employee of Borrower.

“Borrower Loans” means loans originated by Borrower to third-party borrowers and secured by real property collateral.

“Borrower’s Loan Portfolio” means those Borrower Loans held by Borrower for Borrower’s own account.

“Borrowing Base” means, as set forth in detail in the chart attached hereto as Exhibit E and incorporated by reference herein, the lesser of (i) an amount equal to a percentage of the unpaid principal balance of those Collateral Loans that are deemed to be Eligible Receivables by Lender, in Lender’s reasonable judgment (“LTB”) or (ii) an amount equal to a percentage of the appraised value (as reflected in the most recent Appraisal of the underlying real property collateral delivered by Borrower to, and accepted and approved by, Lender) of the underlying real property collateral securing those Collateral Loans that are deemed to be Eligible Receivables by Lender, in Lender’s reasonable judgment, up to the Credit Limit (“LTV”). In addition, no Eligible Receivable shall be included in the Borrowing Base (measured from the date such Eligible Receivable was first included in the Borrowing Base) for a period in excess of the “Dwell Time” set forth on Exhibit E hereto that is applicable to such Underlying Collateral.

“Borrowing Base Certificate” means a Borrowing Base Certificate substantially in the form of Exhibit C attached hereto.

“Business Day” means Monday through Friday, excluding any day of the year on which banks are required or authorized to close in California.

“Collateral” means all real property and personal property security for the Loan, including Borrower Loans.

“Collateral Deed of Trust” means any deed of trust or mortgage, as applicable, and assignment of rents executed and delivered by a Collateral Loan Obligor to secure repayment of a Collateral Loan, in form and content satisfactory to Lender in its reasonable opinion and judgment, which deed of trust (i) encumbers real property that is located in California, (ii) is not developed with a single family owner-occupied residence, unless such Collateral Loan is made for a business purpose, (iii) is the primary collateral for a Collateral Loan, as determined by Lender in its reasonable and absolute opinion and judgment, and (iv) which has a first (1^st) lien priority on the Underlying Collateral.

“Collateral Loan” means a Borrower Loan that has been pledged to Lender as Collateral, and all “Pledged Property” as defined in the Pledge Agreement.

“Collateral Loan Documents” means all instruments, agreements, and documents evidencing and securing all covenants, terms, and conditions of a Collateral Loan, in form and content satisfactory to Lender in its reasonable opinion and judgment, duly executed by a Collateral Loan Obligor to and in favor of Borrower and pledged to Lender as security for Advances by Lender to Borrower and the other obligations of Borrower hereunder and under the other Loan Documents.

3

“Collateral Loan Document Package” means: all instruments, agreements, and documents described in Schedule 1 attached to this Agreement and incorporated herein by reference either in original or photocopy form as therein provided, evidencing and/or securing the Advance therein requested and/or the Collateral Loan therein described.

“Collateral Loan Fee” means, with respect to each Collateral Loan, (a) $75.00 for a single-family or multi-family investor loan up to four (4) units; and (b) $250.00 for all other commercial real estate loans, as applicable.

“Collateral Loan Note” means the promissory note executed or to be executed by each Collateral Loan Obligor to evidence a Collateral Loan, in form and content satisfactory to Lender in its reasonable opinion and judgment.

“Collateral Loan Obligor” means a Person which is obligated by contract or by operation of law to pay and/or perform any or all of the indebtedness and other obligations of the borrower under and arising out of a Collateral Loan and Collateral Loan Documents evidencing and securing the same, including, without limitation, a Person designated as borrower or co-borrower thereunder and a Person guaranteeing said indebtedness and/or other obligations, whether by pledge of collateral or by agreeing to be personally liable therefor.

“Commitment Term” means that period during which Loan Proceeds may be disbursed under this Agreement, which is a period commencing on the date of this Agreement and expiring March 13, 2022.

“Compensating Balance Account(s)” means all checking, savings or money market accounts maintained at Lender by Borrower, and/or Borrower’s Affiliates in aggregate, including the Operating Account; but shall not include certificates of deposit.

“Consolidated” means the consolidation of any Person, with its properly consolidated subsidiaries, in accordance with GAAP.

“Conversion Fee” means the sum of one-quarter of one percent (0.25%) of the then outstanding principal balance of the Loan for an extension of the initial Maturity Date if requested and given in accordance with the provisions of Section 4.12, below.

“Credit Limit” means Ten Million and No/100 Dollars ($10,000,000.00).

“Debt Service” means all regularly scheduled payments of principal and interest payable by Borrower to Lender under the Note; provided that following the conversion of the Loans into a term loan, “Debt Service” shall not include (i) the twenty-five percent (25%) quarterly installment payments of principal or (ii) the payment of the entire unpaid obligation outstanding under the Note on the Maturity Date, in each case, to the extent set forth in the Note.

“Debt Service Coverage Ratio” shall mean, at any given time, the ratio of (a) EBITDA to (b) Debt Service.

4

“EBITDA” shall mean, at any given time, the sum of (a) the Net Operating Income, (b) all depreciation and amortization expenses deducted in determining the Net Operating Income, (c) interest paid on all indebtedness and monetary obligations deducted in determining Net Operating Income, and (d) the aggregate amount of federal and state income taxes on or measured by income of Parent that were deducted in determining the Net Operating Income, all as determined in accordance with GAAP.

“Eligible Receivables” means those Collateral Loans which Lender, in its reasonable discretion, shall deem eligible for borrowing, based on such considerations as Lender may from time to time deem appropriate in its reasonable discretion. Without limitation, Eligible Receivables shall not include the following (with any receivable other than an Eligible Receivable being deemed an “Ineligible Receivable”):

(a) Collateral Loans for which any required payments are more than sixty (60) days past due;

(b) Collateral Loans that are in default or otherwise non-performing;

(c) Any Collateral Loan for which judicial foreclosure proceedings are pending under or with respect to the Collateral Deed of Trust securing such Collateral Loan;

(d) Any Collateral Loan that is not secured by a Collateral Deed of Trust with a first (1st) lien priority on the Underlying Collateral;

(e) Intentionally Omitted;

(f) Collateral Loans which have materially incomplete loan documentation or for which any loan documentation is not fully executed;

(g) Collateral Loans that are more than sixty (60) days past their maturity date;

(h) Collateral Loans for which the Collateral Loan Documents do not provide for the creation of a perfected first priority lien upon and/or security interest in all Underlying Collateral and are not otherwise in form and substance satisfactory to Lender in its reasonable discretion;

(i) Any Collateral Loan that is secured by property outside of the state of California;

(j) Any Collateral Loan that is secured by residential property which is entirely owner occupied and not made for a business purpose;

(k) Collateral Loans for which any executory obligations remain to be performed by Borrower or any subsequent holder or assignee of the Collateral Loan Documents;

5

(l) Collateral Loans for which any levy has been made on any Underlying Collateral therefor and such levy has not been bonded or insured over or shall continue unstayed for ninety (90) days or more after the date Borrower becomes aware of such levy;

(m) Any real estate owned by Borrower;

(n) Any Collateral Loan that is secured by a Collateral Deed of Trust encumbering land to be developed with ground up construction;

(o) Any Collateral Loan that is secured by a Collateral Deed of Trust encumbering property used for any other purpose other than multi-family residential, retail, office, industrial, investor-owned single family residential, mixed use, single family loans made for a business purpose, warehouses, office condominiums, or as otherwise approved by Lender in its reasonable discretion, subject to the sublimits set forth on Exhibit E;

(p) Any Collateral Loan that is required to be removed as part of the Borrowing Base pursuant to the terms of this Agreement; and

(q) Any Underlying Collateral which Borrower elects to remove from the Borrowing Base by providing written notice to Lender.

“Event of Default” means any of those occurrences specified in Section 7.

“Financial Statements” means balance sheets, income statements, reconciliations of capital structure, statements of sources and applications of funds, and true and complete copies of income tax returns (bearing the original signature of the relevant taxpayer), all prepared in accordance with GAAP.

“Financing Statement” means one or more financing statements (Form UCC-1) given by Borrower to Lender covering the Loan Collateral.

“GAAP” means generally accepted accounting principles consistently applied and maintained throughout the period indicated and consistent with the prior financial practice of the Person providing such financial information, except for changes mandated by the Financial Accounting Standards Board or any similar accounting authority of comparable standing.

“Governmental Agency” means any federal, state or local governmental or quasi-governmental agency.

“Gross Income” means, for any given time, any and all revenues, income, receipts and money owed to or received by or on behalf of, and moneys due to, a Person, solely from such Person’s use, operation, management and/or conduct of its businesses, including, without limitation, (a) gross revenues derived from such Person’s operation and possession of any real property, and (b) proceeds derived from (1) accounts receivable, (2) inventory and other tangible and intangible property and (3) contract rights and other rights and assets now or hereafter owned by such Person in connection with its business, as calculated by Borrower in its reasonable discretion and in accordance with GAAP.

6

“Guarantor” means Michael R. Burwell, an individual.

“Guaranty” means a written guaranty of Guarantor in favor of Lender, in form and substance satisfactory to the parties, as the same may be amended, modified, restated, renewed, replaced, extended, supplemented or otherwise changed from time to time.

“Initial Advance” shall mean that certain advance or disbursement of Loan Proceeds by Lender to Borrower, in the amount specified in a Request for Advance, upon satisfaction of the terms and conditions in this Agreement for the making of the Initial Advance, including without limitation pledging the Initial Loan Collateral to Lender.

“Initial Loan Collateral” shall mean those Borrower Loans set forth on Exhibit D attached hereto, which shall be pledged to Lender as Collateral for the Loan.

“Initial Loan Collateral Document Package” shall mean, for the Initial Loan Collateral: all instruments, agreements, and documents described in Schedule 1 attached to this Agreement and incorporated herein by reference, either in original or photocopy form as therein provided, evidencing and securing the Initial Loan Collateral therein described.

“Laws” means all federal, state, and local laws, rules, regulations, ordinances, and codes.

“Liabilities” shall have the meaning usually given that term in accordance with GAAP.

“Loan” means the total amount of Advances, as described in Section 4 of this Agreement in a principal amount not to exceed the Availability at any one time.

“Loan Closing” shall mean the date on which the Initial Advance is disbursed, upon and subject to satisfaction and performance of all covenants and conditions of the Loan as hereinafter provided.

“Loan Collateral” means all of the following personal property and related rights of Borrower, whether now existing or hereafter acquired or arising, whether now owned or hereafter acquired, and wherever located: (1) all Collateral Loan Documents, (2) all of Borrower’s right, title and interest in and to all Underlying Collateral, including, without limitation, all Underlying Collateral repossessed and acquired by Borrower by foreclosure or by transfer or retention in lieu of foreclosure, and (3) all proceeds of the foregoing, including, without limitation, all proceeds in the form of accounts, instruments, chattel paper, contract rights, general intangibles, deposit accounts, insurance policies, insurance proceeds, and returned premiums for insurance.

“Loan Documents” means this Agreement, the Note, any Guaranty and such other documents as Lender may reasonably require as evidence of and/or security for the Loan, together with each Assignment of Deed of Trust, Pledge Agreement, Allonge, Financing Statement and all other instruments, agreements, and documents evidencing and securing the Advances made and to be made by Lender hereunder and all obligations hereunder and herein described, including, without limitation, all those documents described in Section 4.5 below, and in Schedule 1 hereto, as applicable.

7

“Loan Fee” means the sum of $50,000.00 payable by Borrower to Lender for the making of the Loan, which shall be fully earned by Lender at Loan Closing.

“Loan Proceeds” means all funds advanced by Lender as an Advance to Borrower under this Agreement.

“Maturity Date” means March 13, 2022, subject to earlier acceleration upon the terms and conditions provided in the Note, and also subject to extension in connection with the conversion of the Loan to a term loan as provided in Section 4.12 of this Agreement.

“Net Operating Income” means, at any given time, the amount by which Gross Income exceeds Operating Expenses, as calculated by Borrower in accordance with its reasonable discretion and GAAP.

“Net Worth” of any Person shall mean, as of any date, an amount equal to all Consolidated Assets of such Person minus such Person’s Consolidated Liabilities, each as determined in accordance with GAAP.

“Note” means the Promissory Note of even date herewith, in the face amount of the Loan, executed by Borrower in favor of and payable to Lender, or order, which shall be in form and content satisfactory to the parties, in their reasonable discretion, as the same may be amended, modified and/or supplemented from time to time.

“OFAC” means the United States Department of the Treasury, Office of Foreign Assets Control.

“OFAC Prohibited Person” means a country, territory, individual or person (i) listed on, included within or associated with any of the countries, territories, individuals or entities referred to on The Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked Persons or any other prohibited person lists maintained by governmental authorities, or otherwise included within or associated with any of the countries, territories, individuals or entities referred to in or prohibited by OFAC or any other Anti-Money Laundering Laws, or (ii) which is obligated or has any interest to pay, donate, transfer or otherwise assign any property, money, goods, services, or other benefits from the Collateral directly or indirectly, to any countries, territories, individuals or entities on or associated with anyone on such list or in such laws.

“Operating Account” means Borrower’s demand deposit account with Lender, bearing the account number to be advised by Lender, into which Advances are deposited.

“Operating Expenses” means, at any given time, the sum of the current expenses of operation, maintenance and conducting of the businesses of a Person, as calculated by Borrower in its reasonable discretion and in accordance with GAAP; provided, however, Operating Expenses shall not include Debt Service, or any allowance for depreciation, renewals or replacement of capital assets or any other noncash charges.

“Parent” means Redwood Mortgage Corp., a California corporation.

8

“Person” means an individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated organization or a Governmental Agency.

“Pledge Agreement” means the Pledge and Security Agreement, as the same may be amended, modified and/or supplemented from time to time, duly executed and delivered to Lender by Borrower, whereby Borrower grants to Lender a security interest in Borrower’s Loan Collateral.

“Request for Advance” means each written request for an Advance under this Agreement prepared and delivered by Borrower to Lender in the form and with the information requested by Lender, which request shall be deemed to constitute Borrower’s representation and warranty to Lender that all conditions to the Advance therein requested have been satisfied.

“Request for Approval as Eligible Receivable” means each written request for approval of any Collateral Loan (including any Borrower Loan that in connection with such approval as an Eligible Receivable will become a Collateral Loan) as an Eligible Receivable under this Agreement prepared and delivered by Borrower to Lender in writing in a form acceptable to Lender in its reasonable discretion, which request shall be accompanied by a Collateral Loan Document Package and shall be deemed to constitute Borrower’s representation and warranty to Lender that all conditions to (i) such Collateral Loan being an Eligible Receivable, (ii) all Collateral Loan Documents therein described and (iii) all Loan Documents tendered concurrently therewith, in each case, have been satisfied.

“Section” means a numbered or lettered paragraph, sub-paragraph or other division of this Agreement, and all references in this Agreement to a Section (other than references to statutes) are to Sections of this Agreement.

“Underlying Collateral” means the real property and any and all other assets of any Collateral Loan Obligor, or of other Persons, pledged or otherwise assigned to Borrower as collateral security for repayment of any Collateral Loan, as more fully described in the Collateral Loan Documents; and including all land and improvements described in the Collateral Loan Document Package, including, without limitation, all fixtures, rights, rights of way, easements, rents, income, and profits, and all policies and proceeds of insurance and other interests appurtenant thereto which shall be encumbered by a Collateral Deed of Trust constituting a valid and enforceable trust deed lien of record thereon.

“Unused Line Fee” means a quarterly fee equal to one-half of one percent (0.50%) per annum on the average daily difference between one-half of the Credit Limit and the aggregate unpaid principal amount of outstanding Advances. The Unused Line Fee shall be payable as provided in Section 4.1.1.4.

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SECTION 2.

INTERPRETATIONS

2.1. NUMBER, GENDER. Any defined terms used in the plural shall include the singular and such terms shall encompass all members of the relevant class.

2.2. SCHEDULES AND EXHIBITS. All schedules and exhibits to this Agreement are incorporated herein by reference.

2.3. OTHER TERMS. Capitalized terms other than accounting terms, and not defined herein, have the meanings given them in the California Uniform Commercial Code. The term “document” is used in its broadest sense and encompasses agreements, certificates, opinions, consents, instruments and other written material of every kind. The terms “including” and “include” mean “including (include), without limitation.”

SECTION 3.

REPRESENTATIONS AND WARRANTIES OF BORROWER

Borrower hereby represents and warrants to Lender as of the date of this Agreement, the date any Loan Proceeds are disbursed to Borrower, and each and every date during the term of the Loan, or any portion thereof, as the context admits or requires, that:

3.1. CAPACITY. Borrower is a limited liability company, formed under the laws of Delaware and duly qualified to do business in the State of Delaware and in any state in which the nature of its business requires it to be so qualified and is lawfully empowered and possesses the capacity to enter into and carry out the terms and provisions of this Agreement.

3.2. VALIDITY OF LOAN DOCUMENTS. The Loan Documents are and shall continue to be in all respects valid and binding upon Borrower according to their terms, The execution and delivery by Borrower of and the performance by Borrower of all its obligations under the Loan Documents have been duly authorized by all necessary action and do not and will not:

3.2.1 Require any consent or approval not heretofore obtained or any other Person.

3.2.2 Violate any provision of other agreements to which Borrower is bound.

3.2.3 Result in or require the creation or imposition of any mortgage, deed of trust, pledge, lien, security interest, claim, charge, right of others or other encumbrance of any nature (other than under the Loan Documents) upon or with respect to any property now owned or leased or hereafter acquired by Borrower.

3.2.4 To Borrower’s knowledge, violate any provision of any Laws, or of any order, writ, judgment, injunction, decree, determination, or award.

3.2.5 To Borrower’s knowledge, result in a breach of or constitute a default under, cause or permit the acceleration of any obligation owed under, or require any consent under any indenture or loan or credit agreement or any other agreement, lease, or instrument to which Borrower is a party or by which Borrower or any property of Borrower is bound or affected.

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3.3. NOT IN DEFAULT OR VIOLATION. To Borrower’s knowledge, Borrower is not (i) in default under or in violation of any Laws, order, writ, judgment, injunction, decree, determination or award which could cause a material adverse impact to the financial condition of Borrower or (ii) under any obligation, agreement, instrument, loan, or indenture, whether to Lender or otherwise, or any lease which could cause a material adverse impact to the financial condition of Borrower. To Borrower’s knowledge, no event has occurred and is continuing, or would result from the making of any Advance, which constitutes an Event of Default.

3.4. NO GOVERNMENTAL APPROVALS REQUIRED. Borrower does not require any authorization, consent, approval, order, license, exemption from, or filing, registration, or qualification with, any Governmental Agency in connection with the execution and delivery by Borrower, and the performance by Borrower, of all or any of its obligations under the Loan Documents.

3.5. TAX LIABILITY. Borrower has filed and shall file all tax and related information returns (federal, state, and local) required to be filed and has paid and shall pay (subject to Borrowers right to withhold payment while it contests, in good faith, the amount and applicability of any such taxes) all taxes shown thereon to be due, including interest and penalties, if any.

3.6. FINANCIAL STATEMENTS. All Financial Statements, tax returns and other financial information of Borrower which have heretofore been submitted to Lender fairly present the financial position of Borrower at the date of its preparation.

3.7. PENDING LITIGATION. There are no actions, suits, or proceedings pending, or to the knowledge of Borrower or Guarantor threatened, against or affecting Borrower, or involving the validity or enforceability of any of the Loan Documents, except actions, suits, and proceedings that are fully covered by insurance or which, if adversely determined, would not substantially impair the ability of Borrower or Guarantor to perform its obligations under the Loan Documents, and neither Borrower nor Guarantor is in default with respect to any order, writ, injunction, decree or demand of any court or any Governmental Agency.

3.8. VIOLATION OF LAWS. Borrower has no knowledge of any violations or notices of violations of any Laws which would materially and adversely impact the Loan Collateral.

3.9. COMPLIANCE WITH ENVIRONMENTAL LAWS. To Borrower’s knowledge, Borrower does not presently, and will not in the future, use, store, manufacture, generate, transport to or from, or dispose of any toxic substances, hazardous materials, hazardous wastes, radioactive materials, flammable explosives or related material on or in connection with any property or the business of Borrower on any property. To Borrower’s knowledge, Borrower does not presently, and will not in the future, permit any lessee on any property to use, store, manufacture, generate, transport to or from, or dispose of any hazardous materials on or in connection with any property or the business on any property, except to the extent the foregoing are used in the ordinary course of business. “Hazardous materials,” and “hazardous waste” shall include, but not be limited to, such substances, materials and wastes which are or become regulated under applicable Laws or which are classified as hazardous or toxic under applicable Laws.

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3.10. SOLVENCY. Borrower is and shall continue to be able to pay its debts as they mature and the realizable value of its Assets is, and at all times that it may have obligations hereunder shall continue to be, sufficient to satisfy any and all obligations hereunder.

3.11. PRINCIPAL PLACE OF BUSINESS. If Borrower hereafter intends to move its principal place of business, it shall first give prior written notice to Lender of its intention so to move, the date that such move is anticipated, and its new address.

3.12. PERMITS. Borrower possesses all licenses and permits that are required by Law to conduct its business.

3.13. NO ERISA PLAN. Borrower does not maintain a plan under the Employee Retirement Income Security Act of 1974, as amended from time to time.

3.14. FULL DISCLOSURE. To the best of Borrower’s knowledge, all information in the loan application, financial statements, certificates, or other documents and all information prepared and delivered by Borrower or its Affiliates to Lender in obtaining the Loan is correct and complete in all material respects, and there are no omissions therefrom that result in such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof. To Borrower’s knowledge, all information in any loan application, financial statement, certificate or other document prepared and delivered to Lender on behalf of Borrower by Persons other than Borrower or its Affiliates, and all other information prepared and delivered to Lender on behalf of Borrower by Persons other than Borrower Party or its Affiliates in applying for the Loan is correct and complete in all material respects, and there are no omissions therefrom that result in any such information being incomplete, incorrect, or misleading in any material adverse respect as of the date thereof.

3.15. USE OF PROCEEDS; MARGIN STOCK. The proceeds of each Advance will be used by Borrower solely for the purposes specified in this Agreement. None of such proceeds will be used for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U of the Board of Governors of the Federal Reserve System (12 C.F.R. Part 221), or for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry a margin stock or for any other purpose which might constitute this transaction a “purpose credit” within the meaning of such Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock. Neither Borrower nor any Person acting on behalf of Borrower has taken or will take any action which might cause any Loan Documents to violate Regulation U or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934, or any rule or regulation thereunder, in each case as now in effect or as the same may hereafter be in effect. Borrower and Borrower’s Affiliates own no “margin stock”.

3.16. GOVERNMENTAL REGULATION. Borrower is not subject to regulation under the Federal Power Act, the Investment Company Act of 1940, the Interstate Commerce Act (as any of the preceding have been amended), or any other Law which regulates the incurring by Borrower of indebtedness, including but not limited to laws relating to common or contract carriers or the sale of electricity, gas, steam, water, or other public utility services.

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SECTION 4.

THE LOAN

4.1. REVOLVING LINE OF CREDIT; TERM LOAN.

4.1.1 Revolving Line of Credit. Upon the request of Borrower, in the form of a Request for Advance, made at any time and from time to time during the Commitment Term, and so long as there is no Event of Default continuing beyond any applicable grace and/or notice period under the Loan Documents, Lender shall make Advances to Borrower, subject to the covenants, terms and conditions of the Loan Documents; provided that Lender shall not be obligated to make Advances to Borrower whenever the aggregate principal amount of all Advances outstanding at any time exceeds or would exceed, at any one time, the Availability. Borrower may repay Advances and obtain new Advances within the Availability, subject to the provisions of this Agreement, provided such Advances are requested and complete Collateral Loan Document Packages are submitted to Lender prior to the expiration of the Commitment Term. This is a revolving line of credit providing for Advances. During the Commitment Term, Borrower may repay principal amounts and reborrow them. Borrower agrees not to permit the outstanding principal balance of Advances under the line of credit to exceed the Availability. Subject to the other terms and conditions of this Agreement, Borrower agrees as follows:

4.1.1.1 Maximum Amount of Advances.

(a) The total amount of Advances available to Borrower is limited to the Borrowing Base, which shall be calculated by Lender, in Lender’s sole, but reasonable, determination, upon receipt of the Borrowing Base Certificate as set forth herein. Borrower acknowledges that an Eligible Receivable shall remain in the Borrowing Base until such Eligible Receivable becomes an Ineligible Receivable. In the event that any Eligible Receivable used in calculating the Borrowing Base becomes an Ineligible Receivable, Lender may, at its option, and in its sole, but reasonable, discretion, re-calculate the Borrowing Base. At no time shall the aggregate outstanding Advances exceed the Availability. If, at any time, the aggregate outstanding Advances exceeds the Borrowing Base or the Credit Limit, then Borrower shall either repay Lender forthwith such amount as may be necessary to eliminate such excess or increase the Borrowing Base as set forth herein as may be necessary to eliminate such excess.

(b) In no event shall the amount advanced by reason of a single Collateral Loan exceed $2,000,000.00.

4.1.1.2 Method for Request for Advances. Each Request for an Advance under the Loan shall be made by an Authorized Person completing, executing and delivering a Request for Advance and Borrowing Base Certificate to Lender. Each Request for Advance shall be deemed delivered only upon actual receipt by Lender at the address specified in Section 9.4 hereof (or at the E-Mail address of Lender specified in Section 9.4 hereof) of such Request for Advance. Lender shall have the right, but not the obligation to conduct any

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preliminary due diligence desired by Lender, which shall be at Borrower’s reasonable expense after the occurrence and during the continuation of an Event of Default. If Lender makes a preliminary determination in Lender’s reasonable opinion that (a) the requested Advance does not satisfy Lender’s underwriting criteria or (b) any of the conditions precedent set forth in Section 4 or elsewhere in this Agreement have not been satisfied, Lender shall have no obligation to make the requested Advance; otherwise Lender shall promptly make such Advance into the Operating Account. From the Loan Closing to the end of the Commitment Term, Borrower may borrow and repay the Advances in whole or in part, and reborrow, all in accordance with the terms and conditions of this Agreement. Borrower shall have no right to borrow on or after the end of the Commitment Term. The Lender shall incur no liability to the Borrower for dispersing Advances into the Operating Account upon any request referred to herein which the Lender believes in good faith to have been made by an Authorized Person. Borrower may request Advances as needed based on and subject to the available Borrower Base and the other terms and conditions of this Agreement.

4.1.1.3 Initial Advance. Upon satisfaction of the terms and conditions as required hereunder for the making of the Initial Advance and the pledging of the Initial Loan Collateral, including without limitation, satisfaction of the conditions precedent as set forth in Section 4.4.1 and Section 4.5, Lender shall disburse the Initial Advance to Borrower.

4.1.1.4 Unused Line Fee. Commencing with the calendar quarter ending September 30, 2020, for each calendar quarter during which the aggregate average daily unpaid principal amount of outstanding Advances is less than fifty percent (50%) of the Credit Limit, Borrower shall pay to Lender, from its own funds, the Unused Line Fee. The Unused Line Fee shall be calculated on a calendar quarterly basis by Bank for the preceding calendar quarter, and shall be due and payable by Borrower to Lender in arrears on the tenth (10^th) Business Day following the last day of each March, June, September and December during the Commitment Term, commencing with the calendar quarter ending on September 30, 2020. The Unused Line Fee shall be non-refundable, and shall be deemed fully earned by Lender upon the expiration of each calendar quarter during the Commitment Term of the Loan (commencing with the calendar quarter ending on September 30, 2020).

4.1.2 Option for Term Loan. Upon expiration of the Commitment Term, Borrower shall have the option of converting the Loan to a term loan in an amount not to exceed the then outstanding principal balance of the Loan, and, in connection therewith, extending the Maturity Date to March 13, 2023, pursuant to and as more particularly described in Section 4.12, below.

4.2. NOTE; PAYMENTS; INTEREST RATE.

4.2.1 Each Advance shall be evidenced by the Note, and shall accrue interest at the rate provided therein.

4.2.2 Compensating Balances. Borrower and/or its Affiliates in the aggregate shall maintain the Compensating Balance Account(s) with a minimum daily average balance of not less than $1,000,000.00 at all times (“Compensating Balance Amount”) during the term of the Loan, to be reviewed quarterly, beginning with the calendar quarter ending June 30,

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2020, for the preceding three (3) consecutive calendar month period of time. Should the Compensating Balance Amount fail to be maintained during any calendar quarter ending on March 31, June 30, September 30 or December 31, during the term of the Loan (“Quarter”), the interest rate that is applicable on the Note during such Quarter shall automatically be increased by one-quarter of one percent (0.25%) over the interest rate that would otherwise be applicable on the Note for the next Quarter, retroactive to the beginning of such Quarter for the entirety of such Quarter (“Increased Rate”). Borrower shall pay to Lender, within thirty (30) days upon demand by Lender, an amount equal to the additional interest accruing under the Note during such Quarter by reason of the Increased Rate.

4.2.3 Borrower will repay in full all principal under the Note and all interest accrued thereon on the Maturity Date, subject to earlier acceleration upon the terms and conditions set forth in the Note.

4.3. PURPOSE OF ADVANCES; LOAN FEE.

4.3.1 Loan Proceeds of each Advance under this Agreement shall be used by Borrower exclusively to fund one or more Borrower Loans.

4.3.2 The Loan Fee shall be paid by Borrower to Lender in accordance with Section 4.1.1.4 above. The Loan Fee will be in addition to all other fees mentioned in this Agreement, and shall be deemed the Loan Fee shall be deemed fully earned and non refundable when paid, whether or not any Loan Proceeds are disbursed at any time.

4.4. CONDITIONS PRECEDENT. In addition to all other conditions of the effectiveness of this Agreement, the obligations of Lender pursuant to this Agreement shall be subject to the satisfaction or waiver by Lender of the following conditions:

4.4.1 Borrower, at its sole expense, shall deliver to Lender, at its office at 2701 E. Camelback Road, Suite #110, Phoenix, Arizona 85016, on or before the date of the Initial Advance, unless otherwise indicated, the following, in form and substance satisfactory to Lender, in Lender’s reasonable opinion and judgment:

(a) This Agreement;

(b) The Note;

(c) The Pledge Agreement;

(d) A Guaranty executed by Guarantor;

(e) A Request for Advance in respect of the Initial Advance (electronic delivery of each Request for Advance to Lender is acceptable);

(f) The Initial Loan Collateral Document Package;

(g) The Financing Statement;

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(h) Resolutions and/or other authorizations of Borrower and such other Persons as Lender shall request, evidencing, without limitation, approval and authorization of the transactions contemplated hereunder and the documents and instruments to be executed by Borrower in connection herewith; and

(i) Such reasonable additional assignment, agreements, certificates, reports, approvals, instruments, documents, financing statements, consents, and opinions which are necessary for Lender to perfect its interests in the Collateral Loan Documents.

4.4.2 Borrower shall have opened the Operating Account with Lender;

4.4.3 Lender shall have approved the Financial Statements of Borrower;

4.4.4 No suit, action, or other proceeding of material consequence shall be pending or threatened which seeks to restrain or prohibit the consummation of the transactions contemplated by this Agreement, or to obtain damages or other relief in connection therewith;

4.4.5 Borrower shall have paid to Lender any fees and charges due under the terms of the Loan Documents;

4.4.6 Lender shall have conducted, or caused to be conducted, (i) a field audit of Borrower (including, without limitation, of Borrower’s processes, practices and regulatory compliance), the results of which must be satisfactory to Lender, in Lender’s reasonable opinion and judgment, and (ii) background checks of Borrower and such other Persons as Lender shall require, the results of which must be satisfactory to Lender, in Lender’s reasonable opinion and judgment;

4.4.7 Lender’s security interest in all Collateral Loans then in existence shall have been perfected by the filing of the Financing Statement, delivery of the original Collateral Loan Documents, recording of any Collateral Loan Documents and shall be and remain a first priority perfected security interest in and to all such Collateral Loans, subject only to such action as may be required under applicable law to perfect Lender’s security interest in collateral subsequently acquired by Borrower pursuant to each Collateral Loan;

4.4.8 There shall be no breach of any warranty or representation of Borrower; and

4.4.9 There shall be no event or circumstance which constitutes an Event of Default under this Agreement.

4.5. CONDITIONS OF ADVANCES. Lender’s obligation to make each Advance (including the Initial Advance) shall be subject to the satisfaction or waiver by Lender of the following additional conditions precedent, in addition to all other conditions of each Advance provided elsewhere in this Agreement and in the other Loan Documents:

4.5.1 All conditions to this Agreement under Section 4.4 above (other than those set forth in Section 4.4.1), shall be satisfied in full;

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4.5.2 Borrower shall have delivered to Lender a fully executed Request for Advance;

4.5.3 Concurrent with each Request for an Advance, Borrower shall execute and deliver to Lender (i) a fully completed and executed Borrowing Base Certificate and (ii) an updated summary, in form and detail satisfactory to Lender, of the Collateral Loans and other Borrower Loans in Borrower’s Loan Portfolio detailing the status of such Collateral Loans and other Borrower Loans, including without limitation, outstanding amounts due, status of performance, status of real property collateral and other information that may be required by Lender for each Borrower Loan;

4.5.4 Borrower shall have paid to Lender the Collateral Loan Fee for each Collateral Loan (including, without limitation, each of the Collateral Loans included in the Initial Loan Collateral) that is approved by Lender as an Eligible Receivable and pledged to Lender as Collateral;

4.5.5 No event or circumstance shall have occurred or be continuing which constitutes an Event of Default continuing beyond any applicable grace and/or notice period;

4.5.6 Lender shall have received payment of the reasonable fees and costs actually incurred by Lender in connection with each Advance and the preparation of the Loan Documents, including, but not limited to, reasonable third-party attorneys’ fees;

4.5.7 Lender shall have approved the Collateral Loans that have qualified as Eligible Receivables (as provided in Section 4.6) in connection with the Request for Advance; and

4.6. ELIGIBLE RECEIVABLES

4.6.1 Approval of Eligible Receivables. Lender shall have no obligation to consider any Collateral Loan (including any Borrower Loan that in connection with the approval thereof as an Eligible Receivable will be a Collateral Loan) for approval as an Eligible Receivable unless and until the following conditions precedent are satisfied in Lender’s reasonable and absolute opinion and judgment, in addition to all other conditions to approval of any Eligible Receivable provided elsewhere in this Agreement and in the other Loan Documents:

(a) Borrower shall prepare and deliver to Lender, for Lender’s review and approval, a complete Collateral Loan Document Package, in form and content acceptable to Lender in its reasonable judgment evidencing and otherwise pertaining to the Collateral Loan between Borrower and its Collateral Loan Obligor;

(b) All terms and conditions of the Collateral Loan and all Collateral Loan Documents pertaining thereto shall comply with all requirements for Collateral Loans as provided in this Agreement;

(c) Borrower’s security interest in all Underlying Collateral shall then, or thereafter concurrently with actual disbursement of Loan Proceeds to or for the account of a Collateral Loan Obligor, constitute a valid, enforceable, and duly perfected security interest in the Underlying Collateral in a first priority position and all proceeds thereof;

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(d) No event or circumstance shall have occurred or be continuing which constitutes an Event of Default beyond any applicable grace and/or notice period;

(e) Borrower shall deliver to Lender the Collateral Loan Document Package, including, without limitation, an executed Assignment of Deed of Trust, Allonge and all other items set forth in Schedule 1 attached hereto;

(f) Borrower shall execute and deliver to Lender a Supplement to the Pledge Agreement, Allonge, and an Assignment of Deed of Trust (which shall be retained by Lender and not recorded unless an Event of Default continuing beyond any applicable notice and/or grace period occurs under this Agreement), for each Collateral Loan, and Lender’s security interest in all Loan Collateral and related rights of Borrower with respect to each Collateral Loan shall then, or thereafter concurrently with actual disbursement of Loan Proceeds to or for the account of Borrower, be a valid, enforceable and first priority perfected security interest in and to all such Loan Collateral, and all proceeds thereof;

(g) Any title policy included within any Collateral Loan Document Package shall include such endorsement(s) as Lender deems necessary or appropriate, in its reasonable judgment, including, without limitation, insuring the validity, priority and enforceability of Borrower’s security interest in the Collateral Deed of Trust; and

(h) All conditions of the funding by Borrower of the Collateral Loan shall have been satisfied in accordance with the provisions of the Collateral Loan Documents and Borrower shall have fully funded the Collateral Loan.

4.6.2 Review of Collateral Loan Document Package; Approval of Eligible Receivables. Lender shall have a period of five (5) Business Days following submission by Borrower of a completed Collateral Loan Document Package for any Collateral Loan within which to review and approve or disapprove Borrower’s request to approve such Collateral Loan as an Eligible Receivable (“Borrower’s Request”); provided, however, that in the event that Lender fails to notify Borrower, within such five (5) Business Day period, of its approval or disapproval of such Borrower’s Request, then Borrower may send a written notice to Lender reiterating such Borrower’s Request (a “Restated Request”), and Lender shall have a further period of five (5) Business Days following Lender’s receipt of such Restated Request within which to notify Borrower of Lender’s approval or disapproval of such Borrower’s Request. If, within the aforementioned period, Lender has not notified Borrower in writing that such Collateral Loan is approved as an Eligible Receivable, then Lender shall be deemed to have not approved such Collateral Loan and such Collateral Loan shall not be an Eligible Receivable and no longer be deemed a Collateral Loan as set forth in Section 4.7.8.

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4.6.3 Termination of Approval of Eligible Receivables. Notwithstanding any approval by Lender of any Collateral Loan as an Eligible Receivable, any such approval shall be deemed to terminate if, at any time an Eligible Receivable fails to meet any criteria set forth in the definition of “Eligible Receivable”. Upon any such termination of an approval as an Eligible Receivable, the applicable Collateral Loan shall automatically cease to be an Eligible Receivable and a Collateral Loan and be removed from the Borrowing Base and, if the aggregate outstanding amount of Advances then exceeds the updated Availability, Borrower shall repay the Advances or increase the Borrowing Base as set forth in Section 4.1.1. Notwithstanding the removal of any such Collateral Loan from the Borrowing Base, such Collateral Loan shall remain a “Collateral Loan” until, and unless, such Collateral Loan is released pursuant to Section 4.7.

4.6.4 Appraisals. The initial Appraisal of any underlying real property collateral securing any Borrower Loan (including, without limitation, any Appraisals of the underlying real property collateral securing the Borrower Loans comprising the Initial Loan Collateral) shall be provided by Borrower to Lender, at Borrower’s expense.

4.6.5 Environmental Surveys. Borrower shall obtain a public environmental database survey acceptable to the Lender on all loans collateralized by commercial real estate. At Lender’s request, Borrower shall deliver a Phase I, and if indicated, a Phase II environmental survey by a qualified environmental engineer indicating an absence of environmental concerns identified in the environmental database survey with regard to the Underlying Collateral of any Collateral Loan, satisfactory to Lender and its counsel. Any such environmental survey shall be prepared at the Borrower’s expense.

4.7. RELEASE OF COLLATERAL LOANS. Borrower may request that any Borrower Loan constituting a Collateral Loan be released as a Collateral Loan, and the liens and security interests of Lender therein be released, and, if such Borrower Loan is also an Eligible Receivable, that such Borrower Loan cease to be an Eligible Receivable, provided, that:

4.7.1 Borrower shall provide Lender a written request to remove such Borrower Loan as a Collateral Loan, which request shall specify the requested date for the removal of such Borrower Loan as a Collateral Loan;

4.7.2 Lender shall have received at least three (3) Business Days prior to the requested date of removal of such Borrower Loan as a Collateral Loan, a Borrowing Base Certificate presenting Borrower’s computation of the Borrowing Base as of the requested date of removal and after giving effect to the removal of such Borrower Loan as a Collateral Loan and, if such Borrower Loan is also an Eligible Receivable, after giving effect to such Borrower Loan ceasing to be an Eligible Receivable;

4.7.3 After giving effect to the removal of such Borrower Loan as a Collateral Loan and, after giving effect to such Borrower Loan ceasing to be an Eligible Receivable, the outstanding Advances shall not exceed the Borrowing Base or the Borrower shall commit to either repay the Advances or increase the Borrowing Base as set forth in Section 4.1.1;

4.7.4 No event or circumstance which constitutes an Event of Default continuing beyond any applicable grace and/or notice period under this Agreement shall exist prior to or after giving effect to the removal of such Borrower Loan as a Collateral Loan; provided that neither this Section 4.7.4 nor anything in the Loan Documents shall prevent the release of any Underlying Collateral that Borrower is required to return to Collateral Loan Obligors pursuant to applicable Law;

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4.7.5 Lender shall have received a certificate signed by an authorized officer of Borrower certifying that the conditions in subsections 4.7.3 and 4.7.4 of this Section 4.7 are satisfied;

4.7.6 Borrower shall have provided to Lender such documents, in form and substance satisfactory to Lender in its sole, but reasonable, discretion, as may be necessary to release Lender’s liens and security interests in the Collateral Loan Documents; and

4.7.7 Notwithstanding anything to the contrary contained in this Agreement, if Borrower as lender under the Collateral Loan, is required by Law or the terms of the Collateral Loan Documents to release the Collateral Loan Obligor from the Collateral Loan; then (i) Lender shall immediately release the Collateral Loan to Borrower, and if such Borrower Loan is also an Eligible Receivable, after such release it shall cease to be an Eligible Receivable, and (ii) within two (2) Business Days of such Release, Borrower shall provide a Borrowing Base Certificate presenting Borrower’s computation of the Borrowing Base as of the date of removal.

4.7.8 Notwithstanding anything to the contrary contained herein, if a Collateral Loan is not deemed an Eligible Receivable or ceases to be an Eligible Receivable and Borrower has satisfied each of the terms set forth in this Section 4.7.8 to Lender’s reasonable satisfaction, it shall no longer be a Collateral Loan and Lender shall immediately release the Collateral Loan to Borrower.

4.8. REPAYMENT. In addition to other provisions set forth herein, repayment of the Loan will be required as follows:

4.8.1 Interest and principal payments under the Loan shall be due and payable to Lender pursuant to the provisions of the Note.

4.8.2 Intentionally Omitted.

4.8.3 All payments hereunder or under the Note shall be made by Borrower without any offset or deduction for or on account of any present or future taxes, imposts or duties, of whatever nature, imposed or levied by or on behalf of any Governmental Agency. If at any time, whether by reason of any present or future Law or other requirement, Borrower shall be compelled by such Law or other requirement to deduct or withhold such taxes, imposts or duties, Borrower shall pay such additional amounts to Lender as may be necessary such that every net payment under this Agreement and the Note on which Borrower is obligated, after such deduction or withholding, will not be less than the amount required hereunder or thereunder.

4.8.4 Whenever any payment to be made under this Agreement and the Note shall be due on a day other than a Business Day of Lender, such payment may be made on the next succeeding Business Day, and such extension of time shall in such cases be included in the computation of payment of interest hereunder and under the Note.

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4.9. DEPOSIT ACCOUNT. Borrower hereby grants, assigns, pledges and hypothecates to Lender a first priority security interest in all of Borrower’s right, title and interest in the Operating Account maintained by Borrower with Lender, as security for each and all of the undisputed obligations of Borrower to Lender under the Loan Documents. Notwithstanding anything to the contrary contained herein, Borrower shall not be deemed to ever grant, assign, pledge or hypothecate a security interest in any trust account.

4.10. NO AUTOMATIC SET-OFF. The existence of any sum or sums being on deposit with Lender shall in no way constitute a set off against or be deemed to compensate the obligations of the Loan or any payment or performance due under the Loan Documents or this Agreement, unless and until Lender, by affirmative action, shall so apply said accounts or any portion thereof, and then only to the extent applied by Lender.

4.11. RELIANCE BY LENDER AND ACQUITTANCE. Lender may conclusively assume that the statements, facts, information, and representations contained herein and/or in any affidavits, orders, receipts, or other written instrument(s) that are filed with Lender or exhibited to it by an Authorized Person, are true and correct, and Lender may rely thereon without any investigation or inquiry.

4.12. CONVERSION TO TERM LOAN. Upon expiration of the Commitment Term (“Conversion Date”), Borrower shall have the option of converting the Loan to a term loan in an amount not to exceed the then outstanding principal balance of the Loan, and, in connection therewith, extending the Maturity Date to March 13, 2023, upon the occurrence of each and all of the following conditions, each of which must occur or be satisfied (or waived by Lender in writing), as applicable, by no later than the Conversion Date:

4.12.1 As of the Conversion Date, no Event of Default continuing beyond any applicable grace and/or notice period shall exist under any of the Loan Documents and Borrower shall be in full compliance with each term, condition and covenant contained in this Agreement and the other Loan Documents;

4.12.2 Borrower shall have provided Lender a written request for extension of the Maturity Date no later than thirty (30) days prior to the Conversion Date;

4.12.3 There shall have occurred no material adverse change in the financial conditions of Borrower from that which existed as of Loan Closing;

4.12.4 Borrower shall provide Lender with such reasonable additional assignments, agreements, certificates, reports, approvals, instruments, documents, subordination agreements, financing statements, consents and opinions as Lender may reasonably request in connection with conversion of the Loan to a term loan;

4.12.5 Borrower shall pay to Lender, from Borrower’s own funds, all fees, costs and expenses of Lender arising from or relating to the conversion of the Loan to a term loan, including, without limitation, Lender’s reasonable third-party legal expenses; and

4.12.6 Borrower shall have paid the Conversion Fee to Lender, from Borrower’s own funds, which Conversion Fee shall be deemed fully earned and non-refundable to Borrower upon (i) receipt by Lender, and (ii) conversion of the Loan to a term loan as contemplated by this Section 4.12.

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4.13. NO ADVANCES AFTER CONVERSION TO TERM LOAN. If the Loan is converted to a term loan under Section 4.12, above, Borrower shall not be entitled to any new Advance of Loan Proceeds, and shall not request the same from and after the Conversion Date.

SECTION 5.

THE COLLATERAL LOANS

Borrower hereby assigns, pledges, transfers, hypothecates and sets over to Lender a first priority security interest in all of its right, title and interest in and to the Collateral as security for the Loan. Borrower shall use commercially reasonable efforts to fully and faithfully perform and satisfy all covenants and conditions of the Collateral Loan Documents and as of the closing of each Collateral Loan, shall take all commercially reasonable steps necessary and appropriate in order to perfect Borrower’s security interest and lien upon all Underlying Collateral and to perfect Lender’s security interest in all Loan Collateral. Borrower shall not make any Collateral Loan to any Person other than a Collateral Loan Obligor without Lender’s prior written consent. Borrower shall service the Collateral Loan in accordance with this Agreement and all applicable Laws and, to the extent not expressly governed thereby, will, at a minimum, exercise the same degree of care as Borrower exercises with respect to the servicing and administration of loans held by Borrower for its own account. Without limiting the generality of the foregoing standards, Borrower’s servicing duties and authority shall include the following:

5.1. COLLECTION. Borrower shall diligently and promptly take all commercially reasonable steps necessary and/or appropriate under the circumstances to cause all Collateral Loan Obligors to make full and timely payment of all obligations due under the Collateral Loan Documents.

5.2. MONITORING COMPLIANCE; NO MODIFICATIONS. Borrower shall use commercially reasonable efforts to monitor and verify material compliance by Collateral Loan Obligors with all obligations under the Collateral Loan Documents. Borrower shall not modify, amend or waive any provision of the Collateral Loan Documents that (a) lowers the interest rate on the Collateral Loan Note below the rate set forth therein, (b) extends the Collateral Loan for a period of more than eighteen (18) months, or (c) would otherwise make a Collateral Loan that would no longer qualify as an Eligible Receivable, in each case, without the written consent of Lender, which Lender may give or withhold in its sole discretion. Borrower shall promptly provide Lender written notice and a copy of any amendment, modification or waiver made to the Collateral Loan Documents. Borrower hereby authorizes Lender, in Lender’s sole discretion, to perform a collateral audit on any Collateral Loan at any time during the term of the Loan (but so long as no Event of Default has occurred and is continuing, not more than once per calendar year), utilizing an auditor acceptable to Lender, and at Borrower’s reasonable expense.

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5.3. MAINTENANCE OF INSURANCE; SETTLEMENT. Borrower shall use commercially reasonable efforts to cause the Collateral Loan Obligors to at all times insure the Underlying Collateral against loss or damage by fire and other risks as shall be required pursuant to the Collateral Loan Documents, with Borrower to be the loss payable beneficiaries and/or additional insureds as their respective interests appear. In the event of any damage or destruction of the Underlying Collateral, or any taking of all or a portion of the Underlying Collateral by power of eminent domain, Borrower shall take any and all commercially reasonable action as may be necessary or appropriate to make a timely claim for proceeds or an award to which the holder of the Collateral Loan Documents is or may then be entitled.

5.4. MANAGEMENT OF PROPERTY. If Borrower acquires title to or possession of the Underlying Collateral, Borrower (i) shall take all reasonable steps necessary to cause the Underlying Collateral to be properly managed, maintained, repaired, and adequately insured, and (ii) to the extent provided by Law, shall cause all rents and other income and proceeds and other rights generated from the Underlying Collateral and any insurance proceeds to be properly collected and applied for the account and benefit of Borrower and/or Lender according to their respective interests in the Underlying Collateral.

5.5. REPORTING. Should Borrower at any time become actually aware of the occurrence of any loss, damage, destruction, waste, presence or release of any hazardous substance, or nuisance upon or from the Underlying Collateral, Borrower shall promptly report to Lender Borrower’s findings and such other information related to such occurrence as Lender may reasonably request.

5.6. MAINTENANCE OF SECURITY INTEREST. Borrower shall perfect, and use commercially reasonable efforts to maintain the perfected status and priority, of all security for the Collateral Loans, including, but not limited to, all security interests in personal property and real property security. Without limiting the generality of the foregoing, Borrower shall cause to be filed at all appropriate locations all such financing statements as shall be required or permitted pursuant to the Collateral Loan Documents, and all continuation statements extending the financing statements.

5.7. REPORTING AND REMITTANCE. Within thirty (30) days following the end of each calendar month, Borrower shall prepare and deliver to Lender a written report of the status of each Collateral Loan as of the end of such calendar month, which report shall include, to the extent known by Borrower or in Borrower’s possession, the following and all other information regarding each Collateral Loan as Lender may request from time to time: (a) the name and address of the Collateral Loan Obligors, and the loan number; (b) the principal amount of all advances, and all accrued and unpaid interest, on each Collateral Loan, and the date last paid and next due date; and (c) the existence of any breach or default by Collateral Loan Obligors under the Collateral Loan Documents.

5.8. DEFAULT BY COLLATERAL LOAN OBLIGORS; THIRD PARTY CLAIMS

5.8.1 In the event of any breach or default by any Collateral Loan Obligor in the payment or performance of any obligations under the Collateral Loan Documents of a Collateral Loan, then, so long as no Event of Default shall have then occurred and be continuing beyond any applicable grace and/or notice period, Borrower shall have the right and

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obligation to promptly and diligently exercise and enforce any and all rights and remedies available to Borrower under such Collateral Loan Documents and by operation of law in order to collect all indebtedness thereunder and to realize upon and liquidate all Underlying Collateral related to such Collateral Loan in payment thereof, including, without limitation, by commencing and pursuing to completion foreclosure of all liens and security interests (or otherwise reaching a settlement or work out with such Collateral Loan Obligor) encumbering the Underlying Collateral related to such Collateral Loan. Borrower shall also timely file and pursue any and all claims which the holder of such Collateral Loan Documents shall be entitled to assert against third parties as may be necessary or appropriate in order to prevent losses to the Underlying Collateral or to the Loan Collateral related to a Collateral Loan, including, without limitation, all claims against any title insurance company with respect to any policy of title insurance issued in connection with a Collateral Loan. All actions taken by Borrower in the exercise and enforcement of the Collateral Loan Documents related to a Collateral Loan shall be undertaken and carried out by Borrower, without any expense to Lender, and in material compliance with applicable Law and in a commercially reasonable manner. Borrower hereby indemnifies and shall defend and hold harmless Lender from and against any and all claims, liabilities, losses, actions, suits, proceedings, damages, and expense of whatever kind or description in connection with any and all actions taken by Borrower and its agents and attorneys in the exercise and enforcement of Borrower’s rights, remedies, and obligations under this Agreement or as a result of any failure by Borrower to perform its obligations hereunder, including, without limitation, all reasonable outside attorneys’ fees and related, reasonable out of pocket expenses incurred by Lender in connection with any such matters. Upon the occurrence and during the continuation of any Event of Default, any and all payments, proceeds, and recoveries received and/or recovered by Borrower with respect to any and all such claims, actions and proceedings shall be paid first to Lender to the extent of the unpaid principal balance of any Collateral Loan Note which is the subject of any such matter; provided, however, Borrower shall not settle or compromise the amount of any such claim, settlement, payment, or award without the prior written approval of Lender, which approval Lender may give or withhold its sole opinion and judgment.

5.8.2 Notwithstanding anything herein to the contrary, in the event that any Collateral Loan that is an Eligible Receivable becomes an Ineligible Receivable, then (i) Lender’s approval of such Collateral Loan as an Eligible Receivable shall automatically terminate, (ii) such Collateral Loan shall automatically cease to be an Eligible Receivable and shall be removed from the Borrowing Base and no longer be deemed to be a Collateral Loan and returned to Borrower pursuant to Section 4.7, and (iii) Borrower shall immediately repay the Advances or increase the Borrowing Base as may be required pursuant to Sections 4.1.1.1 and 4.6.3.

5.8.3 Nothing herein contained shall be construed as a waiver by Lender of any obligation or duty of Borrower hereunder or under any other Loan Documents, including, without limitation, Borrower’s duty to enforce all Collateral Loan Documents in a diligent and timely manner.

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5.9. FORECLOSURE. In the event Borrower commences a foreclosure action or proceeding against a Collateral Loan Obligor pursuant to the provisions of Section 5.8 above, and intends to proceed to sell or otherwise dispose, or to cause a sale or other disposition to be made, of any Underlying Collateral pursuant to any such action or proceedings in liquidation of the indebtedness under a Collateral Loan, then Borrower shall sell or cause a sale of the Underlying Collateral in accordance with applicable Law and standards of commercial reasonableness.

5.10. INSURANCE. Borrower shall obtain and use commercially reasonable efforts to maintain hazard and liability insurance with respect to any and all tangible Loan Collateral which may have been repossessed or otherwise acquired by Borrower in the exercise and enforcement of its rights under the Collateral Loan Documents, in amounts reasonably necessary to protect the interests of Borrower and Lender, as their interests may appear, and issued by companies rated in Best’s Key Rating Guide. Upon Lender’s request, a certificate of insurance acceptable to Lender shall be delivered to Lender together with evidence of payment of premium thereon and an agreement to give Lender at least thirty (30) Business Days’ prior notice of any material changes, termination, or expiration of the policies.

5.11. RIGHT OF ENTRY. Subject to Borrower having the right to enter and visit any such places, Lender and Lender’s employees or agents shall have the right at all times to enter upon any and all real property collateral repossessed or acquired by foreclosure or deed in lieu of foreclosure for whatever purpose Lender deems reasonably appropriate, including, without limitation, inspection of the premises and the posting of such notices and other written or printed material thereon as Lender may deem appropriate or desirable.

SECTION 6.

COVENANTS

In addition to anything else herein stated:

6.1. LENDER MAY EXAMINE BOOKS AND RECORDS; ANNUAL COMPLIANCE AUDIT.

6.1.1 Lender shall have the right, during all business hours, acting by and through its employees or agents, to examine the books, records, and accounting data of Borrower, and to make extracts therefrom or copies thereof; provided that any extracts or copies shall remain confidential information and be sent to Borrower upon the termination or expiration of this Agreement. Lender’s obligation to keep any such information confidential shall survive the expiration or earlier termination of this Agreement. Borrower shall promptly (but in no event later than five (5) Business Days after the request) make such books, records, and accounting data available to Lender, as stated above, upon reasonable prior written request, and upon like request shall promptly advise Lender, in writing, of the location of such books, records, and accounting data. Borrower shall at all times permit Lender to review, audit and examine all such books and records, either directly or through one or more auditors designated by Lender, including independent contractors; the result of any such audits shall become confidential information as described in the first sentence of this Section 6.1.1.

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6.1.2 Without limiting Lender’s rights under Section 6.1.1 above or under any other provision of this Agreement, Lender shall have the right, once per calendar year at such time as Lender shall choose in its sole discretion, to conduct a compliance audit and report with respect to the Collateral Loans (“Annual Audit and Report”), which Annual Audit and Report shall be performed and prepared for Lender at Borrower’s sole expense by an auditor acceptable to Lender, and which Annual Audit and Report shall provide such analyses, opinions and determinations as Lender shall require regarding the Collateral Loans, including, without limitation, Borrower’s compliance with all material requirements, regulations and mandates imposed on Borrower under applicable Law with respect to the Collateral Loans (collectively, “Collateral Regulations”). If any Annual Audit and Report includes an opinion or determination by the auditor that Borrower is not in compliance with any Collateral Regulations, and if Borrower fails to remedy such noncompliance to the reasonable satisfaction of Lender and the auditor within thirty (30) days after written notice of such noncompliance has been given by Lender to Borrower (or such longer time period as Lender may agree in writing in its sole discretion) , then, so long as such noncompliance continues, (i) Borrower shall have no right to seek or obtain any further Advances, and (ii) Lender shall have no obligation to make any further Advances.

6.2. PAYMENT OF TAXES AND OTHER DEBT. Borrower shall pay, or cause to be paid, and discharge, or cause to be discharged, (a) before delinquency all taxes, assessments, and governmental charges or levies imposed upon it, upon its income or profits, or upon any property belonging to it (including, without limitation, the Collateral); (b) when due all lawful claims (including, without limitation, claims for labor, materials, and supplies), which, if unpaid, might become a lien, charge or encumbrance upon any of its assets or property (including, without limitation, the Collateral); and (c) all its other obligations and indebtedness when due; provided, however, that Borrower may contest any of the foregoing in good faith and by appropriate proceedings diligently prosecuted by Borrower as long as Borrower has adequate reserves to pay any adverse determination or has otherwise provided Lender evidence of a surety or bond to pay any adverse determination.

6.3. COMPLY WITH APPLICABLE LAWS. Borrower shall use commercially reasonable efforts to comply with all applicable Laws, including without limitation, all health and environmental Laws, and all other directions, orders and notices of violations issued by any Governmental Agency relating to or affecting Borrower or the Collateral. Further, Borrower shall indemnify and hold Lender harmless from the failure by Borrower to use commercially reasonable efforts to comply with such Laws to the full extent provided for herein.

6.4. MAINTENANCE OF PROPERTIES AND PRESERVE EXISTENCE. Borrower shall use commercially reasonable efforts to cause its properties to be maintained and preserved, all of its properties, necessary or useful in the proper conduct of its business, Borrower, so long as Borrower remains obligated on the Loan, shall do all things reasonably necessary to preserve and keep in full force and effect Borrower’s organizational status.

6.5. REPORTING REQUIREMENTS. So long as Borrower shall have any obligation to Lender under this Agreement and/or the Loan Documents, Borrower shall prepare, or cause to be prepared, and deliver, or cause to be delivered, to Lender the following Financial Statements and reports, which documents shall all be kept confidential by Lender and subject to the confidentiality provisions described in Section 6.1.1:

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6.5.1 As soon as practicable and in any event within ten (10) Business Days of Borrower’s knowledge of the commencement of any legal action against it that could materially adversely impact Borrower’s financial condition or continuing status, except actions seeking money judgment that are fully insured or bonded, a report of the commencement of such action containing a statement setting forth key details (case number, parties and jurisdiction) of such legal action and any action Borrower proposes to take with respect thereto;

6.5.2 Intentionally Omitted;

6.5.3 Any change in name of Borrower or any Guarantor or use of any trade names or trade styles;

6.5.4 As soon as available, and in any event no later than April 30 of each calendar year, Borrower shall provide to Lender complete and accurate Financial Statements representing the financial condition of Borrower as of the date such Financial Statements are prepared and delivered to Lender, including balance sheets, income statements, sources and uses of funds, detailed schedule of real estate of Borrower, and such other supplemental reports and schedules as Lender shall require, in its reasonable discretion. All such Financial Statements shall be audited, prepared and reviewed by an independent certified public accountant acceptable to Lender and Borrower and shall contain a certification signed by any individual providing a Financial Statement or by one or more authorized representatives of any corporation, partnership, limited liability company or other entity providing a Financial Statement, certifying to the completeness and accuracy of all information. All such Financial Statements shall be prepared and presented in accordance with GAAP, consistently applied;

6.5.5 In addition to the annual Financial Statements required pursuant to Section 6.5.4 and as soon as available, but in any event no later than (i) sixty (60) days following the end of each calendar quarter ending March 31, June 30 and September 30 and (ii) April 30 for the calendar quarter ending December 31, Borrower shall provide to Lender, commencing with the calendar quarter ending on December 31, 2019, complete and accurate consolidated interim Financial Statements representing the financial condition of Borrower as of the end of the immediately preceding calendar quarter, including balance sheets, income statements, sources and uses of funds, and such other reasonable supplemental reports and schedules as Lender shall require, in its sole and absolute discretion. All such interim Financial Statements shall contain a certification signed by any individual providing a Financial Statement or by one or more authorized representatives of any corporation, partnership, limited liability company or other entity providing a Financial Statement, certifying to the completeness and accuracy of all information, without exception. All such interim Financial Statements shall be prepared and presented in accordance with GAAP, consistently applied;

6.5.6 Promptly after becoming available, and in any event by April 30 of each year, or as otherwise requested by Lender, a current annual financial statement of Guarantor in form and substance satisfactory to Lender and certified by such Guarantor that said financial statement fairly presents the financial condition of such Guarantor as of such date;

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6.5.7 Borrower and Guarantor shall furnish to Lender copies of all signed income tax returns (with all forms K-1 attached), together with any extensions, if applicable, of such Borrower or Guarantor within thirty (30) days after they are filed with the relevant taxing authorities, but in no event later than May 15 of each calendar year; provided that, if Borrower or Guarantor successfully obtains an extension, Borrower or such Guarantor shall deliver a copy of such extension to Lender no later than May 15 of such calendar year and copies of all signed income tax returns will thereafter be delivered to Lender within thirty days after they are filed with the relevant taxing authorities, but in no event later than November 15 of such calendar year. All such tax returns shall be prepared by an independent certified public account acceptable to Lender and Borrower in their reasonable discretion;

6.5.8 Commencing on March 31, 2020, and continuing on the last day of each calendar month thereafter, Borrower shall deliver to Lender, no later than thirty (30) days following the end of each calendar month, a monthly Borrowing Base Certificate, summarizing Borrower’s Eligible Receivables as of the last day of the prior calendar month, which Borrowing Base Certificate shall be duly certified by an Authorized Person as to the completeness and accuracy of all information contained therein, without exception, and which Borrowing Base Certificate shall be accompanied by any and all other supporting documentation requested by Lender in its reasonable discretion. In any calendar month, Collateral Loans which have been approved as Eligible Receivables by Lender may be added to the Borrowing Base pursuant to and in accordance with Section 4.6;

6.5.9 Intentionally Omitted.

6.5.10 Within seven (7) days of (i) any contact from any Governmental Agency concerning any environmental protection Laws, including any notice of any proceeding or inquiry with respect to the presence of any hazardous materials on the Underlying Collateral or any Loan Collateral or the migration thereof from or to other property, (ii) any and all claims made or threatened by any third party against any Collateral Loans or Borrower concerning any loss or injury resulting from hazardous materials, or (iii) Borrower’s discovery of any occurrence or condition on any property adjoining or in the vicinity of said property that could cause said property, or any part thereof, to be subject to any restrictions on the ownership, occupancy, transferability, or loss of the property under any Law, Borrower shall either (i) deliver to Lender a report regarding such contact and setting forth in detail and describing any action which Borrower proposes to take with respect thereto, or (ii) remove the applicable Collateral Loan from the Eligible Receivables and if necessary to maintain the Borrowing Base repay the Advances or provide a substitute Eligible Receivable.

6.6. DISTRIBUTIONS Borrower shall not make, declare or permit any distribution to any officer, member, manager, partner or other direct or indirect beneficial owner of Borrower at any time that an Event of Default set forth in Section 7.1(i) or 7.1(ii) has occurred and is continuing beyond any applicable notice and/or grace period or if any such distribution would cause or contribute to an Event of Default set forth in Section 7.1(i) or 7.1(ii) (or event that with the giving of notice or passage of time, or both, would constitute an Event of Default set forth in Section 7.1(i) or 7.1(ii)); provided, that, Borrower shall be entitled to make distributions of income (but not of principal or capital) to investors after the occurrence of any Event of Default other than the Events of Default set forth in Section 7.1(i) or 7.1(ii).

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6.7. TERRORISM AND ANTI-MONEY LAUNDERING. Borrower warrants and agrees as follows:

6.7.1 As of the date hereof and throughout the term of the Loan: (i) Borrower; (ii) any Person controlled by Borrower; (iii) any Person for whom Borrower is acting as agent or nominee in connection with this transaction, is not an OFAC Prohibited Person.

6.7.2 To comply with applicable U.S. Anti-Money Laundering Laws and regulations, all payments by Borrower to Lender or from Lender to Borrower will only be made in Borrower’s name and to and from a bank account of a bank based or incorporated in or formed under the laws of the United States or a bank that is not a “foreign shell bank “ within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. § 5311 et seq.), as amended, and the regulations promulgated thereunder by the U.S. Department of the Treasury, as such regulations may be amended from time to time.

6.7.3 To provide Lender at any time and from time to time during the term of the Loan with such information as Lender reasonably determines to be necessary or appropriate to comply with the Anti-Money Laundering Laws and regulations of any applicable jurisdiction, or to respond to reasonable requests for information concerning the identity of Borrower, or any Person controlled by Borrower, from any governmental authority, self-regulatory organization or financial institution in connection with its anti-money laundering compliance procedures, or to update such information.

6.7.4 The representations and warranties set forth in this Section 6.7 shall be deemed repeated and reaffirmed by Borrower as of each date that Lender makes an Advance to Borrower and each date that Borrower makes a payment to Lender under the Note, this Agreement and the other Loan Documents or receives any payment from Lender. Borrower agrees promptly to notify Lender in writing should Borrower become aware of any change in the information set forth in these representations.

6.8. CHANGE OF OWNERSHIP. There shall be no change in the general partner or manager of Borrower without the prior written consent of Lender.

6.9. CHANGE OF MANAGEMENT. Borrower shall not cause, permit or suffer any change in the present executive or management personnel of Borrower without the prior written consent of Lender.

6.10. COOPERATION. Borrower shall take any and all action reasonably requested by Lender to carry out the intent of this Agreement.

6.11. SITE VISITS, OBSERVATIONS AND TESTING. Subject to Borrower having the right to enter any such places, Lender and its agents and representatives will have the right at any reasonable time, after giving reasonable notice to Borrower, to enter and visit any locations where the Collateral or Underlying Collateral is located for the purposes of observing the Collateral or Underlying Collateral. Lender shall use best efforts to not interfere with Borrower’s or any other persons use of the Collateral. Lender is under no duty to observe the Collateral or Underlying Collateral or to conduct tests, and any such acts by Lender will be solely for the purposes of protecting Lender’s security and preserving Lender’s rights under this

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Agreement. No site visit, observation or testing or any report or findings made as a result thereof (a) will result in a waiver of any default of Borrower; (b) impose any liability on Lender; or be a representation or warranty of any kind regarding the Collateral or Underlying Collateral (including its condition or value or compliance with any laws) or any environmental report (including its accuracy or completeness).

6.12. NO TRANSFER OR FURTHER ENCUMBRANCE. Borrower shall not, without the prior written consent of Lender, which shall not be unreasonably withheld or delayed:

6.12.1 Create, incur, assume, permit or suffer to exist, any mortgage, deed of trust, pledge, lien, hypothecation, charge (fixed or floating), security interest or other encumbrance whatsoever on the Collateral Loans that may have priority to Lender’s first-priority security interest granted herein or otherwise encumber the Collateral Loans, including, without limitation, the Collateral Loans or any interest therein, except as permitted pursuant to this Agreement; provided, however, the foregoing shall not apply to taxes, assessments or governmental charges or levies on property of Borrower, or in respect of a judgment or award against Borrower, if the same shall not at the time be delinquent or thereafter can be paid without penalty, or if Borrower shall have set aside adequate reserves therefor as determined or approved by its certified independent accounting firm, or, if in the case of a judgments or award, execution on the same shall have been effectively stayed pending appeal or review or insured or bonded to the extent of Borrower’s liability in respect thereof, and in the case of all of the foregoing, the same are being contested in good faith and by appropriate proceedings.

6.12.2 Transfer any of the Collateral Loans, or any interest therein, except as otherwise expressly permitted or contemplated pursuant to the Agreement; or

6.12.3 Change the use of any of the Collateral Loans.

6.13. NAME, FISCAL YEAR, ACCOUNTING METHOD, AND LINES OF BUSINESS. Borrower will not change its name or method of accounting. Borrower will not substantially alter its method of doing business in a way that would have a material adverse effect on the financial condition of Borrower.

6.14. LOANS. Borrower will not directly or indirectly (a) make any loan or advance to any other Person other than advances made in the ordinary course of Borrower’s business; (b) use proceeds from an Advance to purchase or otherwise acquire any capital stock or any securities of any other Person, any limited liability company interest or partnership interest in any other Person, or any warrants or other options or rights to acquire any capital stock or securities of any other Person or any limited liability company interest or partnership interest in any other Person; or (c) guarantee or otherwise become obligated in respect of any indebtedness of any other Person.

6.15. INDEBTEDNESS. Borrower shall not assume, create, incur, or permit to exist any obligations or indebtedness in favor of any Person except trade obligations and normal accruals in the ordinary course of business not yet due and payable. Borrower shall not assume, create, incur, or permit to exist any contingent liabilities, including, without limitation, contingent reimbursement obligations under letters of credit. Borrower shall not obtain additional financing from a third party lender.

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6.16. TRANSACTIONS WITH AFFILIATES. Borrower will not, without Lender’s prior written consent, enter into, or cause, suffer or permit to exist, any arrangement or contract with any of its Affiliates, or materially amend any management contract and the agreements set forth on Schedule 2 hereof, unless such transaction is on terms that are no less favorable to Borrower than those that could have been obtained in a comparable transaction on an arms’ length basis from a Person that is not an Affiliate. Notwithstanding anything to the contrary contained herein, Lender agrees that all agreements listed on Schedule 2 comply with the requirements of this Section 6.16.

6.17. TANGIBLE NET WORTH. Borrower shall at all times maintain a minimum Adjusted Tangible Net Worth of $50,000,000.00, measured on a quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year during the term of the Loan, commencing on March 31, 2020, for the immediately preceding three (3) consecutive calendar month period of time, based upon the most recent Financial Statements delivered by Borrower to Lender in accordance with Section 6.5.5, above. Borrower shall deliver to Lender any other documentation and evidence as shall be satisfactory to Lender, in Lender’s reasonable opinion and judgment, evidencing Borrower’s compliance with the minimum requirement set forth in this Section 6.17. If Borrower fails to maintain a minimum Adjusted Tangible Net Worth of $50,000,000.00 as of the end of any quarter, Lender will cease to make any further Advances but agrees to not accelerate repayment of the Loans pursuant to Section 8.1 so long as no other Event of Default has occurred; provided that Lender expressly reserves the right to accelerate repayment of the Loans upon the occurrence of an additional Event of Default. Upon Lender’s receipt of satisfactory evidence that Borrower has regained and met the Adjusted Tangible Net Worth requirement above, Lender shall continue to make further Advances so long as no other Event of Default as occurred

6.18. DEBT SERVICE COVERAGE RATIO. Borrower shall at all times maintain a Debt Service Coverage Ratio of not less than 2.00 to 1.00, which shall be measured on a quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year during the term of the Loan, commencing March 31, 2020, for the preceding three (3) consecutive calendar month period of time. In the event the Debt Service Coverage Ratio falls below 2.00 to 1.00 at any time, Lender will cease to make any further Advances but agrees to not accelerate repayment of the Loans pursuant to Section 8.1 so long as no other Event of Default has occurred; provided that Lender expressly reserves the right to accelerate repayment of the Loans upon the occurrence of an additional Event of Default. Upon Lender’s receipt of satisfactory evidence that the Debt Service Coverage Ratio equals or exceeds 2.00 to 1.00, Lender shall continue to make further Advances so long as no other Event of Default as occurred.

6.19. ENVIRONMENTAL INDEMNITY. Borrower does and shall at all times reasonably indemnify and hold harmless Lender against and from any and all claims, liability, suits, actions, debts, damages, costs, losses, obligations, judgments, charges, and expenses, of every and any nature whatsoever suffered or incurred by Lender in connection with the discharge of hazardous materials or hazardous waste, the presence of any hazardous materials or hazardous waste, or any violation of applicable Laws concerning hazardous materials or hazardous waste regarding or concerning any underlying real property serving as security for any Collateral Loan.

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6.20. OPERATING ACCOUNT.

6.20.1 At all times during the term of the Loan, the Operating Account shall be maintained by Borrower with Lender.

6.20.2 Intentionally Omitted.

6.20.3 Borrower shall be responsible to pay interest and principal due under the terms of the Note, regardless of whether the Operating Account has been disbursed in its entirety or an Event of Default has occurred.

6.20.4 Unless and until there occurs an Event of Default (or an event that with the giving of notice or passage of time, or both, would constitute an Event of Default), the funds in the Operating Account shall be accessible to Borrower, and Borrower shall have the right to withdraw any and all sums on deposit in the Operating Account; provided, however, that there must remain on deposit in the Operating Account a sum sufficient to pay the installments of principal and/or interest due under the Note in the calendar month immediately following the date of Borrower’s intended withdrawal or utilization of funds in the Operating Account. Notwithstanding the foregoing or anything to the contrary stated in this Agreement or in any of the other Loan Documents, upon the occurrence and during the continuation of any Event of Default set forth in Section 7.1 and 7.6, any and all rights of Borrower to withdraw or otherwise utilize any or all of the funds in the Operating Account shall terminate two (2) Business Days following Lender’s prior written notice to Borrower, and, thereafter, Borrower shall have no right to withdraw or otherwise utilize funds from the Operating Account or to reduce the balance in the Operating Account in any manner or for any purpose.

6.20.5 Upon the occurrence and during the continuation of any Event of Default, Lender may continue to withdraw funds from the Operating Account solely to pay any amounts of principal and/or interest due and unpaid under the Note, in Lender’s reasonable opinion and judgment, without further authorization on the part of Borrower.

6.20.6 If, with respect to the Operating Account, an automatic debit is entered to pay amounts of principal and/or interest due under the terms of the Note, but there are insufficient funds in the Operating Account to pay such amounts of principal and/or interest in full on the date such debit is entered, then Lender shall inform Borrower and may, in its sole and absolute discretion, reverse such debit.

6.20.7 Borrower acknowledges that Lender has made no representation or warranty concerning the adequacy or sufficiency of the funds that may, at any time, be maintained in the Operating Account for payment of interest and/or principal on the Loan or any portion thereof.

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6.21. LOAN DELINQUENCY. Borrower shall maintain a loan payment delinquency rate of less than 10.0% during the term of the Loan, measured on a quarterly basis as of March 31, June 30, September 30 and December 31 of each calendar year, commencing with the quarter ending March 31, 2020. Such loan delinquency rate shall be calculated by taking the sum of all Borrower Loans with payments over 61-days past due, less loan loss reserves divided by the total outstanding Borrower Loans. Within thirty (30) days of each calendar quarter end, Borrower shall deliver to Lender a quarterly loan tape for its entire Borrower’s Loan Portfolio, and any other documentation and evidence as shall be satisfactory to Lender, in Lender’s reasonable opinion and judgment, evidencing Borrower’s compliance with this Section 6.21. In the event the loan payment delinquency rate exceeds 10.0% as of the end of any quarter, Lender will cease to make any further Advances but agrees to not accelerate repayment of the Loans pursuant to Section 8.1 so long as no other Event of Default has occurred; provided that Lender expressly reserves the right to accelerate repayment of the Loans upon the occurrence of an additional Event of Default. Upon Lender’s receipt of satisfactory evidence that the loan payment delinquency rate is below 10.0%, Lender shall continue to make further Advances so long as no other Event of Default as occurred.

SECTION 7.

EVENTS OF DEFAULT

There shall be an “Event of Default” under this Agreement if:

7.1. DEFAULT UNDER LOAN DOCUMENTS. Borrower shall fail to (i) pay any principal or interest, or both, when due under the terms of the Note, (ii) pay any other amount owing under this Agreement or any of the other Loan Documents when due or (iii) perform or observe any term, covenant, or agreement contained in this Agreement or in any of the other Loan Documents, as applicable; provided, Borrower and Guarantor shall each be provided with prior written notice and a thirty (30) day opportunity to cure default under clause 7.1(iii) before it shall become an “Event of Default.”

7.2. BREACH OF WARRANTY. Any warranties or representations made or agreed to be made in this Agreement or in any of the other Loan Documents are breached in any material respect or shall prove to be false or misleading in any material respect when made; provided that Borrower shall receive prior written notice and a thirty (30) day opportunity to cure any such default from the time Borrower becomes aware or should have become aware of such breach before it shall become an “Event of Default.”

7.3. LITIGATION AGAINST BORROWER. Any suit brought by a third party in good faith is filed against Borrower, which, if adversely determined, could substantially impair the ability of Borrower to perform any or all of its obligations under and by virtue of this Agreement or any of the other Loan Documents, unless Borrower’s counsel furnishes to Lender its opinion, to the satisfaction of Lender and Lender’s counsel, that, in its judgment the suit is essentially without merit.

7.4. RESERVED.

7.5. RESERVED.

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7.6. BANKRUPTCY. Borrower fails to pay its debts as they become due, or makes an assignment for the benefit of its creditors, or admits, in writing, its inability to pay its debts as they become due, or files a petition under any chapter of the Federal Bankruptcy Code or any similar law, now or hereafter existing, or becomes “insolvent” as that term is generally defined under the Federal Bankruptcy Code, or shall in any involuntary bankruptcy case commenced against it file an answer admitting insolvency or inability to pay its debts as they become due, or fails to obtain a dismissal of such case within thirty (30) calendar days after its commencement or convert the case from one chapter of the Federal Bankruptcy Code to another chapter, or be the subject of an order for relief in such bankruptcy case, or be adjudged a bankrupt or insolvent, or has a custodian, trustee, or receiver appointed for, or has any court take jurisdiction of, its properties, or any part thereof, in any voluntary or involuntary proceeding, including those for the purpose of reorganization, arrangement, dissolution, or liquidation, and such custodian, trustee, or receiver shall not be discharged, or such jurisdiction shall not be relinquished, vacated, or stayed within thirty (30) days after the appointment.

7.7. STATUS. Borrower is liquidated, dissolved, or fails to maintain its status as a going concern.

7.8. EXECUTION LEVY. Execution is levied against any of the Loan Collateral or any lien creditor shall commence suit to enforce a judgment lien against the Loan Collateral, and such action or suit shall not have been bonded or shall continue unstayed for a period of thirty (30) days or more.

7.9. ATTACHMENT. Any proceeding is brought to make any part of the Lender’s commitment to make the Advances subject or liable to attachment or levy by any creditor of Borrower, and such proceeding shall not have been bonded or shall continue unstayed for a period of thirty (30) days or more.

7.10. RESERVED.

7.11. MISREPRESENTATION AND/OR NON-DISCLOSURE. Borrower has made certain statements and disclosures in order to induce Lender to make the Loan and enter into this Agreement, and, if Borrower has made material misrepresentations or failed to disclose any material fact, Lender may treat such misrepresentation or omission as a breach of this Agreement.

7.12. FINANCIAL CONDITION. There is a material adverse changes in Borrower’s financial condition.

7.13. RESERVED.

7.14. CROSS DEFAULT; OTHER OBLIGATIONS. Borrower commits a breach or default in the payment or performance of any other obligation of Borrower, or breaches any warranty or representation of Borrower, under the provisions of any other instrument, agreement, guaranty, or document evidencing, supporting, or securing any other loan or credit extended by Lender, or by any Affiliate of Lender, to Borrower, or to any Affiliate of Borrower, including, but not limited to, any and all term loans, revolving credits, or lines of credit extended from time to time to Borrower (or any Person signing this Agreement on behalf of Borrower), or any other Person with which Borrower is affiliated; provided that Borrower shall have a thirty (30) day opportunity to cure any such default from the time Borrower becomes aware or should have become aware of such breach or default before it shall become an “Event of Default.”

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SECTION 8.

REMEDIES

Upon an Event of Default Lender shall have the following remedies:

8.1 CEASE PAYMENT AND/OR ACCELERATE. Upon, or at any time after, the occurrence of an Event of Default, Lender shall have no obligation to make any further Advances, all sums disbursed or advanced by Lender and all accrued and unpaid interest thereon shall, at the option of Lender, become immediately due and payable, and Lender shall be released from any and all obligations to Borrower under the terms of this Agreement.

8.2 COLLATERAL. Upon, or at any time after the occurrence of an Event of Default under Sections 7.1(i) or 7.1(ii) and Lender reasonably believe that its interest in the Collateral necessary to cover the amount of outstanding principal and interest on the Loans is likely to be impaired, Lender may, at its option, without notice to Borrower or any Affiliate of Borrower, appoint one or more receivers of the Collateral, and Borrower hereby irrevocably consents to such appointment, with such receivers having all the usual powers and duties of receivers in similar cases, including the full power to maintain, sell, dispose and otherwise operate the Collateral upon such terms that may be approved by a court of competent jurisdiction.

8.3 ENFORCEMENT OF RIGHTS. Upon, or at any time after, the occurrence of an Event of Default, Lender may enforce any and all rights and remedies under the Loan Documents, the Deed of Trust and all other documents delivered in connection therewith and against any or all Collateral and may pursue all rights and remedies available at Law or in equity.

8.4 RIGHTS AND REMEDIES NON-EXCLUSIVE. In addition to the specific rights and remedies hereinabove mentioned, Lender shall have the right to avail itself of any other rights or remedies to which it may be entitled, at Law or in equity, including, but not limited to, the right to have a receiver appointed over Borrower and/or its assets, the right to realize upon any or all of its security, and to do so in any order. Furthermore, the rights and remedies set forth above are not exclusive, and Lender may avail itself of any individual right or remedy set forth in this Agreement, or available at Law or in equity, without utilizing any other right or remedy.

SECTION 9.

GENERAL CONDITIONS AND MISCELLANEOUS

9.1. NONLIABILITY OF LENDER. Borrower acknowledges and agrees that by accepting or approving anything required to be observed, performed, fulfilled, or given to Lender pursuant to this Agreement or the other Loan Documents, including any certificate, Financial Statement, appraisal or insurance policy, Lender shall not be deemed to have warranted or represented the sufficiency, legality, effectiveness or legal effect of the same, or of any term, provision, or condition thereof, and such acceptance or approval thereof shall not be or constitute any warranty or representation to anyone with respect thereto by Lender.

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9.2. NO THIRD PARTIES BENEFITTED. This Agreement is made for the purpose of defining and setting forth certain obligations, rights, and duties of Borrower and Lender in connection with the Loan. It shall be deemed a supplement to each Note and the other Loan Documents, and shall not be construed as a modification of any Note or other Loan Documents, except as provided herein. It is made for the sole protection of Borrower and Lender, and Lender’s successors and assigns. No other person shall have any rights of any nature hereunder or by reason hereof or the right to rely hereon.

9.3. TIME IS OF THE ESSENCE. Time is of the essence of this Agreement and of each and every provision hereof.

9.4. NOTICES. All notices, requests, demands, directions, and other communications provided for hereunder and under any other Loan Document (a “Notice”), must be in writing and must be mailed, personally delivered or sent by E-Mail to the appropriate party at its respective address (or E-Mail address, if applicable) set forth below or, as to any party, at any other address as may be designated by it in a written notice sent to the other parties in accordance with this Section.

If any notice is given by mail, it will be effective three (3) calendar days after being deposited in the mails with first- class or air mail postage prepaid; if given by E-Mail when sent; or if given by personal delivery, when delivered.

Such notices will be given to the following:

To Lender:        WESTERN ALLIANCE BANK

2701 East Camelback Road, Suite 110

Phoenix, Arizona 85016

Attention: Seth Davis, Senior Vice President

E-Mail: sdavis@westernalliancebank.com

With copies to:  WESTERN ALLIANCE BANK

2701 E. Camelback Road, Suite #110

Phoenix, Arizona 85016

Attention: Elizabeth Mix, Vice President

E-Mail: emix@WesternAllianceBank.com

To Borrower:     Redwood Mortgage Investors IX, LLC

177 Bovet Road, suite 520

San Mateo, CA 94402

Attention: Michael Burwell

E-Mail: mike@redwoodmortgage.com

9.5. USA PATRIOT ACT NOTICE. Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. Lender will ask for Borrower’s legal name, address, tax ID number or social security number and other identifying information. Lender may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of Borrower or other related persons.

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9.6. INDEMNITY BY BORROWER. Borrower hereby indemnifies and agrees to hold Lender and its directors, officers, agents, attorneys, and employees (individually and collectively, the “Indemnitee(s)”) harmless from and against:

9.6.1 Any and all claims, demands, actions, or causes of action that are asserted against any Indemnitee (other than due to gross negligence or willful misconduct of such Indemnitee) by any Person if the claim, demand, action, or cause of action, directly or indirectly, relates to a claim, demand, action, or cause of action that the Person has or asserts against Borrower; and

9.6.2 Any and all liabilities, actual losses, out of pocket costs, or expenses (including court costs and attorneys’ fees) that any Indemnitee suffers or incurs as a result of the assertion of any claim, demand, action, or cause of action related to such Indemnitee’s action in the enforcement of this Agreement or preservation of Collateral.

9.7. CHANGE IN LAWS. In the event of the enactment, after the date of this Agreement, of any Laws: (a) deducting from the value of property for the purpose of taxation any lien or security interest thereon; (b) imposing upon Lender the payment of the whole or any part of the taxes or assessments or charges or liens herein required to be paid by Borrower; (c) changing in any way the Laws relating to the taxation of deeds of trust or mortgages or security agreements, or debts secured by deeds of trust or mortgages or security agreements, or the interest of the mortgagee or secured party in the property covered thereby; or (d) changing the manner of collection of such taxes; then, to the extent any of the foregoing may affect the Collateral or the indebtedness secured thereby or Lender, then, and in any such event, Borrower, upon demand by Lender, shall pay such taxes, assessments, charges, or liens, or reimburse Lender therefor. If Borrower shall be prohibited from paying such tax or from reimbursing Lender for the amount thereof, Borrower shall execute a modification to the Loan Documents and the Note, which modification shall increase the interest rate payable pursuant to the Note so as to permit Lender to maintain its yield as if such tax had not been imposed. If Borrower shall be prohibited from executing the above-referenced modifications, Lender may, in Lender’s sole discretion, declare the principal of all amounts disbursed and owing under the Note, this Agreement, and the other Loan Documents (including all obligations secured by the Loan Documents) and all other indebtedness of Borrower to Lender, together with interest thereon, to be forthwith due and payable, regardless of any other specified maturity or due date.

9.8. POWER OF ATTORNEY. Borrower does hereby irrevocably appoint, designate, empower, and authorize Lender, as Borrower’s agent, under power of attorney, coupled with an interest, to sign and file for record any financing statements, notices of completion, notices of cessation of labor, or any other notice or written document that it may deem necessary to file or record to protect Lender’s interests.

9.9. NONRESPONSIBILITY. Lender shall in no way be liable for any acts or omissions of Borrower or Borrower’s agents or employees.

9.10. RESERVED.

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9.11. BINDING EFFECTS; ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns, except that Borrower may not assign its rights hereunder or any interest herein without the prior written consent of Lender. Lender shall have the right to assign its rights under this Agreement and to grant participations in the Loan to others, but all waivers or abridgements of Borrower’s obligations that may be granted from time to time by Lender shall be binding upon such assignees or participants, but any such waivers or agreements, to be effective, must be in writing and signed by Lender. In that regard, Borrower agrees that Lender may disclose to each prospective and actual transferee or participant any and all documents relating to the Loan and Borrower. Borrower shall, promptly upon demand, provide Lender or any such purchaser or participant, one or more reasonable written statements confirming Borrower’s indebtedness to Lender and all obligations in connection with the Loan, including the existence of any default thereunder.

9.12. EXECUTION IN COUNTERPARTS. This Agreement and any other Loan Documents, except the Note, may be executed in any number of counterparts, and any party hereto or thereto may execute any counterpart, each of which, when executed and delivered, will be deemed to be an original, and all of which counterparts of this Agreement or any other Loan Document, as the case may be, taken together will be deemed to be but one and the same instrument. The execution of this Agreement or any other Loan Document by any party or parties hereto or thereto will not become effective until counterparts hereof or thereof, as the case may be, have been executed by all the parties hereto or thereto.

9.13. INTEGRATION; AMENDMENTS; CONSENTS. This Agreement, together with the documents referred to herein constitutes the entire agreement of the parties touching upon the subject matter hereof, and supersedes any prior negotiations or agreements on such subject matter. No amendment, modification, or supplement of any provision of this Agreement or any of the other Loan Documents shall be effective unless in writing, signed by Lender and Borrower; and no waiver of any of Borrower’s obligations under this Agreement or any of the other Loan Documents or consent to any departure by Borrower therefrom shall be effective unless in writing, signed by Lender, and then only in the specific instance and for the specific purpose given. The waiver by Lender or Borrower of any breach hereof shall not be deemed, nor shall the same constitute, a waiver of any subsequent breach or breaches.

9.14. NEUTRAL INTERPRETATION. This Agreement is the product of the negotiations between the parties, and in the interpretation and/or enforcement hereof is not to be interpreted more strongly in favor of one party or the other.

9.15. COSTS, EXPENSES, AND TAXES. Borrower shall pay to Lender, on demand:

9.15.1 All reasonable, third party attorneys’ fees and out-of-pocket expenses incurred by Lender in connection with the negotiation, preparation, execution, delivery, and administration of this Agreement and any other Loan Document and any matter related thereto, including, but not limited to, any appraisal (including, the Appraisal) of the Collateral, and appraisal reviews of the Collateral, as well as any Phase I, and if indicated, a Phase II environmental survey by a qualified environmental engineer indicating an absence of environmental concerns in regard to the Underlying Collateral, satisfactory to Lender and its counsel;

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9.15.2 The costs and expenses of Lender in connection with the enforcement of this Agreement and any other Loan Document and any matter related thereto, including the reasonable fees and out-of-pocket expenses of any legal counsel, independent public accountants, and other outside experts retained by Lender and including all costs and expenses of enforcing any judgment or prosecuting any appeal of any judgment, order or award arising out of or in any way related to the Loan, this Agreement, or the Loan Documents; and

9.15.3 All costs, expenses, fees, premiums, and other charges relating to or arising from the Loan Documents or any transactions contemplated thereby or the compliance with any of the terms and conditions thereof, including, but not limited to, recording fees, filing fees, credit report fees, release or reconveyance fees, title insurance premiums, audit fees and appraisal fees.

All sums paid or expended by Lender under the terms of this Agreement shall be considered to be, and shall be, a part of the Loan. All such sums, together with all amounts to be paid by Borrower pursuant to this Agreement, shall bear interest from the date of expenditure at the rate provided in the Note, shall be secured by the Loan Documents, and shall be immediately due and payable by Borrower upon demand.

9.16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties of Borrower contained herein or in any and all other Loan Documents shall survive the making of the Loan and the execution and delivery of the Note, and are material and have been or will be relied upon by Lender, notwithstanding any investigation made by Lender or on behalf of Lender. For the purpose of this Agreement, all statements contained in any certificate, agreement, financial statement, appraisal or other writing delivered by or on behalf of Borrower pursuant hereto or to any other Loan Document or in connection with the transactions contemplated hereby or thereby shall be deemed to be representations and warranties of Borrower contained herein or in the other Loan Documents, as the case may be.

9.17. FURTHER ASSURANCES. Borrower shall, at its sole expense and without expense to Lender, do, execute, and deliver such further acts and documents as Lender from time to time may reasonably require for the purpose of assuring and confirming unto Lender the rights hereby created or intended, now or hereafter so to be, or for carrying out the intention or facilitating the performance of the terms of any Loan Document, or for assuring the validity of any security interest.

9.18. GOVERNING LAW. The Loan shall be deemed to have been made in California, and the Loan Documents shall be governed by and construed and enforced in accordance with the Laws of the State of California. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts, state or federal, of Los Angeles County, California. Notwithstanding the foregoing, the laws of the jurisdiction in which the Collateral for the Loan is located shall apply to the creation and perfection of security interests therein and to the exercise of remedies by Lender that pertain or concern such Collateral, including, without limitation, the foreclosure of the security interests and liens granted in such Collateral.

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9.19. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid shall be inoperative, unenforceable, or invalid without affecting the remaining provisions, and to this end the provisions of all Loan Documents are declared to be severable.

9.20. JOINT AND SEVERAL OBLIGATIONS. If this Agreement is executed by more than one Person as Borrower, the obligations of each of such Persons hereunder shall be joint and several obligations.

9.21. JURY WAIVER. BORROWER WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES. ARISING OUT OF. IN CONNECTION WITH OR IN ANY WAY PERTAINING TO. THIS AGREEMENT, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS. INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER. AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

Borrower has initialed this Section 9.21 to further indicate its awareness and acceptance of each and every provision hereof.

Borrower’s Initials

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IN WITNESS WHEREOF, Borrower and Lender have hereunto caused this Agreement to be executed on the date first above written.

REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company, as Borrower
By:	/s/ Michael R. Burwell
	Name: Michael R. Burwell
	Title:   President, Secretary and Treasurer

Signature Page to

Business Loan Agreement

LENDER:
WESTERN ALLIANCE BANK, an Arizona corporation
By:	/s/ Seth Davis
	Name: Seth Davis
	Title:   Senior Vice President

Signature Page to

Business Loan Agreement

Schedule 1

Collateral Loan Document Package - Real Property

The following instruments and documents, in form and content required by Lender in its reasonable opinion and judgment, shall be included in and collectively constitute a Collateral Loan Document Package as provided and defined in the Agreement:

1. Request For Approval as Eligible Receivable signed by an Authorized Person;

2. The original Collateral Loan Note in favor of Borrower executed by Collateral Loan Obligor;

3. An original Allonge To Promissory Note executed by Borrower, to be attached to the Collateral Loan Note at Lender’s option;

4. An original Assignment of Deed of Trust executed and acknowledged by Borrower;

5. To the extent executed in connection with a Collateral Loan, a true and complete copy of all other Collateral Loan Documents executed by a Collateral Loan Obligor to and in favor of Borrower, including, without limitation:

a. Loan Agreement;

b. Deed of Trust and Assignment of Rents;

c. Security Agreement;

d. Financing statement(s);

e. Agreement Regarding Insurance Requirements and Certificate of Insurance;

f. Certified organization authorization to borrow (corporate resolution, partnership authorization, authorization of members of limited liability company).

6. To the extent executed in connection with a Collateral Loan, a true and complete copies of all relevant underwriting documentation required or otherwise obtained by Borrower, including, without limitation:

a. Borrower’s written credit memorandum approving the Collateral Loan, signed by the requisite officers or representatives of Borrower authorized to approve the same;

b. Appraisal;

c. Copies of the certificates or other acceptable evidence of fire, casualty and flood (if applicable) insurance;

d. Title policy and endorsements to the real property;

e. Preliminary title report and copies of all documents described in all reported exceptions;

f. UCC search of existing financing statements and liens;

g. Certified copies of loan escrow instructions and recording instructions to title company;

h. Organizational documents (articles of incorporation, articles of organization, bylaws, operating agreement, current certificate of good standing);

i. Financial statements and credit reports presenting the financial condition and credit history of the Collateral Loan Obligor;

j. Flood search and flood insurance, if applicable for the real property; and

k. OFAC searches for each Collateral Loan Obligor.

l. Veracheck or other similar environmental report to substantiate the environmental condition of the real property.

Schedule 2

Transactions with Affiliates

Redwood Mortgage Investors VIII, a California Limited Partnership. Private Placement Memorandum Dated August 4, 2005.

Redwood Mortgage Investors IX, LLC – Private Placement Memorandum, Dated May 1, 2018.

Redwood Mortgage Investors X, LLC – Private Placement Memorandum, Dated November 15, 2019.

EXHIBIT A

ALLONGE

Loan Number: ___________________

This Allonge is affixed to and is hereby made a part of that certain Promissory Note dated __________,    ____ (the “Note”) in the original principal amount of ______________________________    ($___________), made by ______________, __________________    in favor of REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company (“Payee”), and evidences the endorsement of the Note by Payee to WESTERN ALLIANCE BANK, an Arizona corporation (the “Bank”), as provided in that certain Pledge and Security Agreement dated as of March 13, 2020 (together with any and all modifications, amendments or supplements thereto, the “Agreement”), between Payee and Bank.

Pay to the order of WESTERN ALLIANCE BANK, an Arizona corporation.

Dated: ___________

REDWOOD MORTGAGE INVESTORS IX, LLC,
a Delaware limited liability company

By:

Name:

Title:

EXHIBIT B

COLLATERAL ASSIGNMENT OF DEED OF TRUST AND

RELATED LOAN DOCUMENTS

Please see attached.

RECORDING REQUESTED BY

AND WHEN RECORDED, MAIL TO:

WESTERN ALLIANCE BANK

2701 E. Camelback Road, Suite #110

Phoenix, Arizona 85016

Attention: Seth Davis

Assessor’s Parcel No.: _____________

COLLATERAL ASSIGNMENT OF DEED OF TRUST AND

RELATED LOAN DOCUMENTS

Loan Number: ___________________

THIS COLLATERAL ASSIGNMENT OF DEED OF TRUST AND RELATED LOAN DOCUMENTS (this “Assignment”) is made as of ________, by REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company (“Assignor” or “Borrower”), to WESTERN ALLIANCE BANK, an Arizona corporation (“Assignee”).

1. Granting Clause. For value received, Assignor hereby grants, conveys, assigns and transfers to Assignee, for security purposes only, all of Assignor’s right, title and interest in and to all beneficial interest under that certain deed of trust dated _________, by

_______________________, as grantor (“Collateral Obligor”), to _____________, as trustee, for the benefit of Assignor, as beneficiary, which was recorded on ____________, as Instrument No. ___________, in the Official Records of __________ County, ____________, and any and all amendments, modifications, renewals, supplements, extension or revisions thereof (the “Deed of Trust”), together with the promissory note and other agreements, instruments and documents relating thereto (collectively referred to hereinafter as the “Pledged Documents”).

2. Secured Obligations. This Assignment is given for the purpose of securing payment and performance of the obligations of Assignor under that certain Promissory Note executed by Assignor and payable to the order of Assignee dated as of [______], 2020 in the maximum stated principal sum of Ten Million and No/100 Dollars ($10,000,000.00) (the “Note”), that certain Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement) executed by Assignor and Assignee dated [______], 2020 (“Loan Agreement”), and all other agreements, instruments and documents relating thereto (as any of the same may be amended, modified and/or supplemented from time to time, collectively referred to hereinafter as the “Loan Documents”). The Loan Documents include, without limitation, that certain Pledge and Security Agreement executed by Assignor in favor of Assignee, dated as of [_______], 2020 (the “Security Agreement”).

3. Enforcement. Assignee may exercise its rights under the Loan Agreement, Security Agreement and this Assignment in accordance with their terms, including, without limitation, the right to succeed to all of Assignor’s right, title and interest in and to all beneficial interest under the Deed of Trust and the Pledged Documents.

4. Property Encumbered. The real property encumbered by the Deed of Trust is described in Exhibit A attached hereto and incorporated herein by this reference.

5. Amendments. This Assignment may not be amended, modified or waived except with the written consent of Assignor and Assignee.

6. Termination. This Assignment shall terminate upon (i) payment in full of the indebtedness owing to Assignee under the Note, the Loan Agreement and the Loan Documents; or (ii) the termination of the Security Agreement (or earlier to the extent of any partial or full release or reconveyance of this Assignment), unless prior to the termination of the Security Agreement, Assignee has succeeded to beneficiary’s interest under the Deed of Trust.

7. Successors and Assigns. The terms of this Assignment shall bind and inure to the benefit of the respective successors and assigns of the parties hereto.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

ASSIGNOR:

REDWOOD MORTGAGE INVESTORS IX, LLC,
a Delaware limited liability company

By:

Name:

Title:

[SIGNATURES MUST BE ACKNOWLEDGED]

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of __________                                      )

County of _______________________        )

On    ____________________, before me, _________________________________, a Notary Public, personally appeared _______________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of ___________ that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature                                                                  

EXHIBIT C

REQUEST FOR ADVANCE AND BORROWING BASE CERTIFICATE

[Please see attached]

EXHIBIT D

SCHEDULE OF INITIAL LOAN COLLATERAL

[Please see attached]

EXHIBIT E

BORROWING BASE AVAILABILITY CHART

		Advance Sublimits ($000s)
Property Type Category	Advance Rate1	Bridge / Renovation		Ground-Up Construction		REO		Dwell Time
SFR Owner Occupied	N/A	$	0	$	0	$	0		N/A
SFR Owner Occupied Business Purpose Loans Only	65% LTB / 50% LTV	$	10.000	$	0	$	0		24 Mos.
SFR Investor	65% LTB / 50% LTV	$	10.000	$	0	$	0		24 Mos.
SFR Rental Investor	65% LTB / 50% LTV	$	10.000	$	0	$	0		60 Mos.
CRE Multi Family	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Mixed Use	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Office	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Retail	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Industrial	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Warehouse	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Office Condominums	65% LTB / 50% LTV	$	5.000	$	0	$	0		36 Mos.
CRE Hospitality	N/A	$	0	$	0	$	0		N/A
CRE Special Purpose	N/A	$	0	$	0	$	0		N/A
Land	N/A	$	0		NA	$	0		N/A

¹  LTB based upon Note’s Unpaid Principal Balance. LTV based upon Bank Reviewed Appraisal.

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PROMISSORY NOTE

$10,000,000.00 PHOENIX, ARIZONA March 13, 2020

FOR VALUE RECEIVED, REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company (“Borrower”), promises to pay to WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”), or to its order, at its office located at 2701 E. Camelback Road, Suite #110, Phoenix, Arizona 85016, or at such other place as the holder hereof may designate, in lawful money of the United States of America, in cash or immediately available funds acceptable to the holder hereof, the principal sum of TEN MILLION AND NO/100 Dollars ($10,000,000.00) or so much thereof as shall have been advanced and is outstanding together with interest on the outstanding principal balance, until paid in full in accordance with the terms, conditions and provisions as hereinafter set forth in this Promissory Note (this “Note”).

LOAN AGREEMENT. This Note is the “Note” as defined in that certain Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement) (the “Loan Agreement”), dated March 13, 2020, entered into by and between Borrower and Lender, as it may have been amended from time to time, and is subject to all of the terms and conditions thereof. All terms not defined herein shall have the same meaning as in the Loan Agreement. In the event of a conflict between the terms of this Note and the Loan Agreement, the terms of this Note shall prevail.

ADVANCES. Advances hereunder shall be made in accordance with the Loan Agreement and may be made by Lender pursuant to a Request for Advance submitted by Borrower. Any such Advance shall be conclusively presumed to have been made to or for the benefit of Borrower when made in accordance with such requests and directions, or when said Advances are deposited into or credited to the account(s) of Borrower with Lender.

INTEREST RATE. Interest on the outstanding principal balance of this Note shall be computed, and calculated based upon a 360-day year and actual days elapsed, and shall accrue at the per annum rate (the “Note Rate”) of the greater of (i) five percent (5.00%), or (ii) the sum of the LIBOR Rate (as defined below) plus three and one-quarter percent (3.25%). “LIBOR Rate” means the one (1) month London Interbank Offered Rate which is identified and published by ICE Benchmark Administration for loans in United States dollars as obtained by Lender from Bloomberg Financial Service System (or, if no longer available, any similar or successor publication selected by Lender), as the same may change and/or be redetermined from time to time accordance with this Note. The LIBOR Rate will initially be determined on the date of the Loan Agreement and shall thereafter be adjusted monthly on each date that payments of principal and/or interest are due under this Note (each, a “Monthly Payment Date”) to the LIBOR Rate determined by Lender to be in effect on the Monthly Payment Date.

If Lender determines (which determination shall be conclusive absent manifest error) that LIBOR ceases to exist or is no longer available, then commencing on the next Monthly Payment Date, the LIBOR Rate shall change to such alternate base rate as Lender determines in its sole discretion to be most comparable to the LIBOR Rate, provided, if Lender determines in its sole discretion there is an industry accepted successor base rate, Lender may substitute such successor base rate.

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Subject to the terms and conditions of Section 4.12 of the Loan Agreement, Borrower has the option to convert the Loan to a one (1) year term loan (the “Term Loan”).

Notwithstanding the foregoing, and pursuant to the terms of the Loan Agreement, should the Compensating Balance Amount (as defined in the Loan Agreement) fail to be maintained on any date during any calendar quarter (i.e., December 31, March 31, June 30 and September 30) during the term of the Loan (“Quarter”), the Note Rate that is applicable during such Quarter shall automatically be increased by one-quarter of one percent (0.25%) over the Note Rate that would otherwise be applicable for the next Quarter, retroactive to the beginning of such Quarter for the entirety of such Quarter (“Increased Rate”), which shall be payable as provided in the Section entitled PRINCIPAL AND INTEREST PAYMENTS below. Borrower shall pay to Lender, within ten (10) Business Days upon demand by Lender, an amount equal to the additional interest accruing under this Note during such Quarter by reason of the Increased Rate.

PRINCIPAL AND INTEREST PAYMENTS. Commencing on April 1, 2020, and continuing on the same day of each and every calendar month thereafter until the Maturity Date (as defined hereinafter), Borrower shall pay to Lender interest due, in arrears, based upon the actual number of days elapsed for that monthly period. In addition, Borrower shall pay Lender principal payments as may be necessary to ensure that the outstanding Advances do not exceed the Borrowing Base, in each case in accordance with the terms of the Loan Agreement.

In the event the Loan is converted to the Term Loan pursuant to Section 4.12 of the Loan Agreement, then:

(a) Commencing on April 1, 2022, and continuing on the same day of each and every calendar month thereafter until the Maturity Date (as extended pursuant to Section 4.12 of the Loan Agreement), Borrower shall pay to Lender monthly installment payments of principal and interest in an amount sufficient to fully amortize the outstanding principal balance of this Note over a one hundred twenty (120) month period (measured for a 120 month period commencing as of the Conversion Date), with interest calculated using the Note Rate; and

(b) In addition to the monthly installment payments of principal and interest, as set forth in clause (a) above, commencing on June 1, 2022, and continuing on the last day of each March, June, September and December, Borrower shall pay to Lender quarterly installment payments of principal, each in an amount equal to twenty-five percent (25%) of the outstanding principal balance of this Note as of the Conversion Date.

Upon the Maturity Date, the entire unpaid obligation outstanding under this Note, the Loan Agreement and any other Loan Documents shall become due and payable in full.

All payments due hereunder, including payments of principal and/or interest, shall be made to Lender in United States Dollars and shall be in the form of immediately available funds acceptable to the holder of this Note.

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APPLICATION OF PAYMENTS. All payments received by Lender from, or for the account of Borrower, due hereunder shall be applied by Lender, in its sole and absolute discretion, in the following manner, or in any other order or manner as Lender chooses:

First. To pay any and all interest due, owing and accrued;

Second. To pay any and all costs, advances, expenses or fees due, owing and payable to Lender, or paid or incurred by Lender, arising from or out of this Note, the Loan Agreement, and the other Loan Documents; and

Third. To pay the outstanding principal balance on this Note.

All records of payments received by Lender shall be maintained at Lender’s office, and the records of Lender shall, absent manifest error, be binding and conclusive upon Borrower. The failure of Lender to record any payment or expense shall not limit or otherwise affect the obligations of Borrower under this Note.

MATURITY DATE. On March 13, 2022 (“Maturity Date”), the entire unpaid principal balance, and all unpaid accrued interest thereon, and all fees, costs, expenses, and other amounts, shall be due and payable without demand or notice, subject to acceleration as provided in this Note. In the event that Borrower does not pay this Note in full on the Maturity Date then, as of the Maturity Date and thereafter until paid in full, the interest accruing on the outstanding principal balance hereunder shall be computed, calculated and accrued on a daily basis at the Default Rate (as defined hereinafter). The Maturity Date may be extended in connection with the conversion of the Loan to the Term Loan pursuant to Section 4.12 of the Loan Agreement.

UNPAID INTEREST, CHARGES AND COSTS. Interest, late charges, costs or expenses that are not received by Lender within ten (10) calendar days from the date such interest, late charges, costs, or expenses become due, shall, at the sole discretion of Lender, be added to the principal balance and shall from the date due bear interest at the Default Rate.

HOLIDAY. Whenever any payment to be made under this Note shall be due on a day other than a Business Day, then the due date for such payment shall be automatically extended to the next succeeding Business Day, and such extension of time shall in such cases be included in the computation of the interest portion of any payment due hereunder.

NO OFFSETS OR DEDUCTIONS. All payments under this Note shall be made by Borrower without any offset, decrease, reduction or deduction of any kind or nature whatsoever, including, but not limited to, any decrease, reduction or deduction for, or on account of, any offset, present or future taxes, present or future reserves, imposts or duties of any kind or nature, that are imposed or levied by or on behalf of any government or taxing agency, body or authority by or for any municipality, state or country. If at any time, present or future, Lender shall be compelled, by any Law, rule, regulation or any other such requirement which on its face or by its application requires or establishes reserves, or payment, deduction or withholding of taxes, imposts or duties, to act such that it causes or results in a decrease, reduction or deduction (as described above) in payment received by Lender, then Borrower shall pay to Lender such additional amounts, as Lender shall deem necessary and appropriate, such that every payment received under this Note, after such decrease, reserve, reduction, deduction, payment or required withholding, shall not be reduced in any manner whatsoever.

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DEFAULT. An Event of Default under the Loan Agreement shall constitute a default under this Note (hereinafter “Default”).

REMEDIES. Upon, or at any time after, the occurrence of a Default, or upon the occurrence of a breach or default under the Loan Documents, or under any other joint and/or several obligation or obligations of a Loan Party to Lender, Lender may, in its sole and absolute discretion declare the entire unpaid principal balance, together with all accrued and unpaid interest thereon, and all other amounts and payments due hereunder, immediately due and payable, without notice or demand.

DEFAULT RATE. From and after the occurrence of any Default in this Note whether by non-payment, maturity, acceleration, non-performance or otherwise, and until such Default has been cured, all outstanding amounts under this Note (including, but not limited to, interest, costs and late charges) shall bear interest at a per annum rate equal to five percent (5%) over the Note Rate (“Default Rate”).

PREPAYMENT. Borrower shall have the right at any time, and from time to time, following prior or contemporaneous written notice to Lender, to prepay all or any portion of the principal amount outstanding on the Note, without premium or penalty. Any partial prepayment shall not result in a reamortization, deferral, postponement, suspension, or waiver of any other payments due under this Note.

LATE CHARGES. Time is of the essence for all payments and other obligations due under this Note. Borrower acknowledges that if any payment required under this Note is not received by Lender within ten (10) calendar days after the same becomes due and payable, Lender will incur extra administrative expenses (i.e., in addition to expenses incident to receipt of timely payment) and the loss of the use of funds in connection with the delinquency in payment. Because, from the nature of the case, the actual damages suffered by Lender by reason of such administrative expenses and loss of the use of funds would be impracticable or extremely difficult to ascertain, Borrower agrees that five percent (5%) of the amount of the delinquent payment, together with interest accruing on the entire principal balance of this Note at the Default Rate, as provided above, shall be the amount of damages which Lender is entitled to receive upon Borrower’s failure to make a payment of principal or interest when due, in compensation therefor. Therefore, Borrower shall, in such event, without further demand or notice, pay to Lender, as Lender’s monetary recovery for such extra administrative expenses and loss of use of funds, liquidated damages in the amount of five percent (5%) of the amount of the delinquent payment (in addition to interest at the Default Rate). The provisions of this paragraph are intended to govern only the determination of damages in the event of a breach in the performance of Borrower to make timely payments hereunder. Nothing in this Note shall be construed as in any way giving Borrower the right, express or implied, to fail to make timely payments hereunder, whether upon payment of such damages or otherwise. The right of Lender to receive payment of such liquidated and actual damages, and receipt thereof, are without prejudice to the right of Lender to collect such delinquent payments and any other amounts provided to be paid hereunder or under any of the Loan Documents, or to declare a default hereunder or under any of the Loan Documents.

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COSTS AND EXPENSES. Borrower hereby agrees to pay any and all costs or expenses paid or incurred by Lender by reason of, as a result of, or in connection with, the enforcement of this Note or any other Loan Documents, including, but not limited to, any and all attorneys’ fees and related costs whether such costs or expenses are paid or incurred in connection with the enforcement of this Note and the other Loan Documents, or any of them, the protection or preservation of any collateral or security for this Note, or any other rights, remedies, or interests of Lender, whether or not suit is filed. Borrower’s agreement to pay any and all such costs and expenses includes, but is not limited to, costs and expenses incurred in, or in connection with, any bankruptcy proceeding, in enforcing any judgment obtained by Lender, and in connection with any and all appeals therefrom, and in connection with the monitoring of any bankruptcy proceeding and its effect on Lender’s rights and claims for recovery of the amounts due hereunder, any proceeding concerning relief from the automatic stay, use of cash collateral, proofs of claim, approval of a disclosure statement, or confirmation of, or objections to confirmation of, any plan of reorganization. All such costs and expenses are immediately due and payable to Lender by Borrower whether or not demand therefor is made by Lender.

WAIVERS. Borrower hereby waives grace, diligence, presentment, demand, notice of demand, dishonor, notice of dishonor, protest, notice of protest, any and all exemption rights against the indebtedness evidenced by this Note and the right to plead any statute of limitations as a defense to the repayment of all or any portion of this Note, and interest thereon, to the fullest extent allowed by law, and all compensation of cross-demands, to the fullest extent allowed by law. No delay, omission or failure on the part of Lender in exercising any right or remedy hereunder shall operate as a waiver of such right or remedy or any other right or remedy of Lender.

MAXIMUM LEGAL RATE. This Note is subject to the express condition that at no time shall Borrower be obligated, or required, to pay interest on the principal balance at a rate which could subject Lender to either civil or criminal liability as a result of such rate being in excess of the maximum rate which Lender is permitted to charge. If, by the terms of this Note, Borrower is, at any time, required or obligated to pay interest on the principal balance at a rate in excess of such maximum rate, then the rate of interest under this Note shall be deemed to be immediately reduced to such maximum rate and interest payable hereunder shall be computed at such maximum rate and any portion of all prior interest payments in excess of such maximum rate shall be applied, or shall retroactively be deemed to have been payments made, in reduction of the principal balance, as the case may be.

AMENDMENT; GOVERNING LAW. This Note may be amended, changed, modified, terminated or canceled only by a written agreement signed by the party against whom enforcement is sought for any such action. This Note shall be governed by, and construed under the Laws of the State of Arizona.

AUTHORITY. Borrower, and each person executing this Note on Borrower’s behalf, hereby represents and warrants to Lender that, by its execution below, Borrower has the full power, authority and legal right to execute and deliver this Note and that the indebtedness evidenced hereby constitutes a valid and binding obligation of Borrower without exception or limitation. In

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the event that this Note is executed by more than one person or entity, the liability hereunder shall be joint and several. Any married person who is obligated on this Note, directly or indirectly, agrees that recourse may be had to such person’s separate property in addition to any and all community property of such person.

USA PATRIOT ACT NOTICE. Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account or obtains a loan. Lender will ask for Borrower’s legal name, address, tax ID number or social security number and other identifying information. Lender may also ask for additional information or documentation or take other actions reasonably necessary to verify the identity of Borrower, Guarantor or other related persons.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, Borrower has executed this Note as of the day and year first above written.

BORROWER:
REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company
By:	/s/ Michael R. Burwell
	Name: Michael R. Burwell
	Title:   President, Secretary and Treasurer

Signature Page to

Promissory Note

PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement (this “Pledge”) is executed and delivered as of the 13th day of March, 2020, by REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company (“Borrower”), in favor of WESTERN ALLIANCE BANK, an Arizona corporation (“Lender”), with respect to the following facts:

Recitals

A. Lender has granted a credit facility (the “Loan”) to Borrower in the maximum principal amount of $10,000,000.00 pursuant to that certain Business Loan Agreement (Revolving Line of Credit and Term Loan Agreement) between Borrower and Lender of even date (the “Loan Agreement”), and as evidenced by that certain Promissory Note from Borrower to Lender of even date in that amount (the “Note”). Capitalized terms used but not defined herein shall have the meaning provided for them in the Loan Agreement.

B. Borrower is in the business of making loans secured by real property and is, or shall be, the owner and holder of promissory notes, including, without limitation, those more particularly described in Schedule 1 attached hereto (individually and collectively, the “Pledged Note”), made by obligors, including, without limitation, those identified in Schedule 1 attached hereto (individually and collectively, “Collateral Loan Obligor”) to Borrower, as Schedule 1 may be amended from time to time. Each Pledged Note, now or hereafter, evidences, or shall evidence, a loan by Borrower to a Collateral Loan Obligor (together with all other such loans made by Borrower, individually and collectively, the “Pledged Loan”). The term “Pledged Note” means not only the Pledged Notes identified in Schedule 1, but any promissory note executed by a party in favor of Borrower which promissory note is in the possession of Lender, including, without limitation, in the possession of any custodian or bailee of Lender, and any promissory note executed by a party in favor of Borrower which evidences a Borrower Loan (as defined in the Loan Agreement), now or hereafter.

C. In connection with the Pledged Notes, Borrower also is, or shall be, the beneficiary under deeds of trust or the mortgagee under mortgages, including, without limitation, those more particularly described in Schedule 1 attached hereto (individually and collectively, “Pledged Deed of Trust”), as Schedule 1 may be supplemented from time to time. Each Pledged Deed of Trust, now or hereafter, is, or shall be, security for a Pledged Note, and encumbers certain real property described in such Pledged Deed of Trust (at times hereinafter, the real property described in the Pledged Deeds of Trust, together with all improvements thereon and fixtures relating thereto, shall be referred to, individually and collectively, as the “Real Property”).

D. As an inducement to Lender to extend the Loan to or for the benefit of Borrower, and in consideration of credit heretofore, now or hereafter granted to Borrower by Lender, Borrower desires to secure the Loan and other obligations of Borrower to Lender, as herein defined, by granting Lender a security interest in the Pledged Note, the Pledged Deed of Trust and all other agreements, instruments and documents relating thereto.

NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, receipt and sufficiency of which are hereby acknowledged, Borrower hereby agrees as follows:

1. Definitions.

(a) “Collateral Assignment” means the Collateral Assignment of each Pledged Deed of Trust and Pledged Note, duly executed and delivered by Borrower to Lender, assigning to Lender, in connection with each Pledged Loan, now or hereafter, all of Borrower’s right, title and interest in and to all beneficial interest under a Pledged Deed of Trust (or Pledged Deeds of Trust) securing such Pledged Loan, together with all Pledged Notes evidencing such Pledged Loan, all Additional Pledged Loan Documents (as hereinafter defined) relating to such Pledged Loan, and any Title Policy (as hereinafter defined) issued in connection with such Pledged Loan, and in form and content acceptable to Lender, in its sole and absolute opinion and judgment.

(b) “Event of Default” shall have the same meaning ascribed to that term in the Loan Agreement. In that regard, the occurrence of an Event of Default under the Loan Agreement shall constitute the occurrence of an Event of Default under this Pledge.

(c) “Obligations” means and includes all present and future obligations, indebtedness and liabilities of Borrower to Lender of every kind and description, direct or indirect, absolute or contingent, joint and/or several, secured or unsecured, due or not due, primary or secondary, liquidated or unliquidated, however acquired, arising under or in connection with the Loan or hereunder, and any and all other agreements, documents, guaranties, notes or instruments by Borrower in favor of Lender (“Other Agreements”), including the Loan Agreement, or by operation of law or otherwise, including, without limitation, all costs, expenses and reasonable attorneys’ fees incurred or paid by Lender in enforcing or attempting to enforce its rights with respect to this Pledge, the Loan, the Other Agreements, and the Pledged Property (each as herein defined) and in preserving, maintaining, protecting, selling, enforcing, foreclosing or otherwise disposing of the Pledged Property.

(d) “Obligor” means any Collateral Loan Obligor and any successors of a Collateral Loan Obligor as the obligor under a Pledged Note and Pledged Loan.

(e) “Pledge” means this Pledge and Security Agreement, as amended, modified or supplemented from time to time.

(f) “Pledged Property” means (i) each and every Pledged Note, and Borrower’s interest, rights and powers thereunder, (ii) each and every Pledged Deed of Trust, and Borrower’s interest, rights and powers thereunder, (iii) all other agreements, instruments and other documents given by a Collateral Loan Obligor to Borrower in connection with each and every Pledged Note and/or the Pledged Deed of Trust and/or the Pledged Loan (collectively, the “Additional Pledged Loan Documents”), and all of Borrower’s interest, rights and powers thereunder, (iv) Borrower’s records with respect to each and every Pledged Note, each and every Pledged Deed of Trust and each and every Pledged Loan, (v) all payments, collections, cash collateral, recoveries, and proceeds of each and every Pledged Note, each and every Pledged Loan, each and every Pledged Deed of Trust and any casualty insurance or condemnation proceeds payable to Lender thereunder, (vi) any and all policies of title insurance naming Borrower as the insured and issued in connection with each and every Pledged Loan (individually and collectively, “Title Policy”), and (vii) the proceeds and products of any and all of the foregoing.

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(g) All terms not specifically defined herein which are defined in the Uniform Commercial Code (“UCC”) as presently in effect in the State of California shall be construed in accordance with the definitions set forth in the UCC. All terms not specifically defined herein which are defined in the Loan Agreement shall have the meanings ascribed therein.

2. Assignment of Payments and Recoveries.

Borrower hereby assigns, pledges, transfers, hypothecates and sets over to Lender, as collateral security for the complete payment and performance of the Obligations when due, a first priority security interest in all of its right, title and interest in and to the Pledged Property as security for the Obligations including, but not limited to, the right to receive all payments, proceeds, and recoveries under the Pledged Property, and upon the occurrence and during the continuation of an Event of Default, the exclusive right to (a) receive and enforce the Pledged Property, (b) exercise the lender’s decision making authority thereunder, and (c) collect all payments and recoveries thereon and all proceeds thereof, to be applied by Lender to payment of the Loan and all fees, costs, and expenses incurred by Lender in connection with the Obligations. Upon the occurrence and during the continuation of an Event of Default, Lender’s rights hereunder shall include the exclusive right to collect and receive all payments, proceeds, and recoveries under and with respect to the Pledged Property, including, without limitation, the exclusive right to enforce the provisions of the Pledged Property in any manner Lender shall determine to be necessary or appropriate, including, without limitation, by judicial action or nonjudicial proceedings, and to otherwise bill for and account to Borrower for any and all payments, proceeds, and recoveries thereon as herein provided. Notwithstanding the foregoing assignment, Borrower, alone, and not Lender, shall be obligated to fulfill all of the monetary and non-monetary obligations of the lender to Collateral Loan Obligor under the Pledged Note, Pledged Deed of Trust and Additional Pledged Loan Documents.

Each Pledged Loan shall be identified by Lender with (i) the date and amount of each Pledged Note, (ii) the name of the Obligor, (iii) the identification of the Pledged Deed of Trust, and

(iv) the identification of the Real Property. Such records of Pledged Loans shall be maintained at Lender’s office, and the records of Lender shall, absent manifest error, be binding and conclusive upon Borrower.

2.1 Unless and until all Obligations to Lender have been fully and finally satisfied and discharged, upon the occurrence of an Event of Default and during the continuance thereof, Lender shall have the sole right to receive any and all payments, proceeds and recoveries under or in connection with the Pledged Loan, and Lender shall have the right to notify Obligor to make all payments under the Loan to Lender. Notwithstanding the foregoing, Borrower shall bill and collect all payments due under and pursuant to the Pledged Loan and shall otherwise observe its standard loan servicing practices with respect to collection of such obligations in the ordinary course of its business. Borrower shall at all times monitor and verify compliance by the Obligor with all obligations under the Pledged Loan in accordance with its standard loan servicing policies, practices, and procedures.

2.2 Lender shall have the right to take any and all other actions as Lender determines to be necessary or appropriate in order to establish and perfect its rights and interests in and to the Pledged Property and in all payments, proceeds, and recoveries thereon.

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2.3 In exercising its rights under this Pledge, Lender shall have no duty to accelerate the maturity of the Loan or the Pledged Loan as a result of any breach or default by Obligor thereunder, or to file or commence any action or proceeding to enforce collection of the Loan or the Pledged Loan or to pursue and enforce any provisional remedies which may be permitted by the provisions of the Pledged Property or by Law, it being understood and agreed that Lender shall have the right to use its sole and absolute discretion in taking steps to collect on the Loan and Pledged Loan.

2.4 Borrower hereby appoints Lender as Borrower’s attorney in fact, with full power of substitution, to, upon the occurrence and during the continuation of an Event of Default, endorse and otherwise negotiate payment in any form made by Obligor under the Pledged Loan to or for the account of Lender, subject to the provisions of this Pledge. Obligor may conclusively rely upon all instructions, notices, requests for payment, and receipts given by Lender in connection with collection of the Pledged Loan.

2.5 Borrower hereby indemnifies, releases and holds harmless Lender from and against any and all losses, damages, claims, costs, and expenses, including reasonable, third party attorneys’ fees and related costs, suffered or incurred by Lender (except if such arises as a result of Lender’s gross negligence or willful misconduct) as a result of any action or proceeding taken by Lender in the collection and enforcement of the provisions of the Pledged Property as herein provided, or as a result of any nonaction by Lender in connection therewith.

2.6 In the event of any breach or default by Obligor in the payment or performance of any obligations under the Pledged Loan, then, so long as no Event of Default shall have then occurred and be continuing, Borrower shall proceed as provided in Section 5.8 of the Loan Agreement. Borrower shall comply with all of the following reporting requirements and other covenants:

2.6.1 Borrower shall maintain records of any and all payments, recoveries and proceeds of the Pledged Property that at any time are received by Borrower, or by any employee, officer, shareholder, agent, attorney, or other representative of Borrower, and shall promptly upon request provide copies of such records to Lender.

2.6.2 Until and unless all Obligations to Lender have been fully and finally satisfied and discharged, any and all payments, proceeds and recoveries upon the Pledged Property including, but not limited to, title to the Real Property, received by Borrower, or by any employee, officer, shareholder, agent, attorney, or other representative of Borrower shall be deemed to be received and held in trust for the sole benefit of Lender, subject to the provisions of this Pledge and the Loan Agreement.

2.6.3 Borrower shall notify Lender in writing of the commencement of any judicial or nonjudicial foreclosure action or proceedings relating to the Real Property that it becomes actually aware of, and any other material action or proceeding against Obligor with respect to the Pledged Property as herein provided, and shall deliver to Lender, within five (5) days after filing with any court or serving upon any party or attorney, true and complete copies of all pleadings, motions, and other papers delivered, served, issued, and/or filed by Borrower in connection with any such action and proceeding.

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2.6.4 Lender shall have the option of monitoring and participating in any and all such actions and proceedings by associating counsel of Lender’s choosing with Borrower’s counsel of record in such action or proceeding. Upon the occurrence and during the continuation of an Event of Default, Lender shall have the right to intervene and take sole decision making control of the prosecution or defense of such action or proceeding at any time and from time to time, in Lender’s sole opinion and judgment.

2.6.5 Borrower shall not propose or enter into any settlement or release agreement with Obligor or any other obligor with respect to any Pledged Property included in the Borrowing Base, nor shall Borrower transfer, assign, or convey, whether directly or indirectly, any interest in such Pledged Property nor release or subordinate any lien on other Collateral included in the Borrowing Base without Lender’s prior written consent, which consent Lender may give or withhold in its sole discretion, opinion and judgment. In the event of any dispute, claim or defense raised by Obligor with respect to the obligations of Obligor under the Pledged Loan or the validity or enforceability of the Pledged Loan, whether or not in connection with any enforcement proceedings commenced by Lender, upon the occurrence and during the continuation of an Event of Default, Lender shall have the right to settle and compromise all such claims and disputes without the requirement of any consent or joinder of any of the other parties hereto.

2.7 In the event Borrower commences a judicial or nonjudicial foreclosure action or proceedings against Obligor pursuant to the provisions of this Pledge, and intends to proceed to sell or otherwise dispose, or to cause a sale or other disposition to be made, of the Real Property pursuant to any such action or proceedings in liquidation of the indebtedness under the Pledged Loan, then, Borrower shall proceed as set forth in Section 5.9 of the Loan Agreement.

2.8 Upon Lender’s actual receipt of payment in full of the Obligations, other than as a result of a foreclosure, Lender shall, upon written demand by Borrower, promptly execute and deliver to Borrower a written reassignment of the Pledged Property, without warranty or recourse, and release and relinquish possession of the Loan to Borrower. Any endorsement by Lender of the original Loan shall be expressly made without recourse or warranty.

2.9 Borrower shall require Obligor to maintain adequate insurance of the Real Property against loss or damage by fire and other risks as shall be required pursuant to the Pledged Loan, the Pledged Note, the Pledged Deed of Trust and the Additional Pledged Loan Documents, with Borrower to be the lender loss payable beneficiaries and/or additional insureds as their respective interests appear, and shall observe its standard loan servicing practices with respect to monitoring compliance with such requirements and force-placement of such insurance upon default.

2.10 In the event Borrower acquires title to or possession of the Real Property, Borrower (i) shall observe reasonable property management practices with respect to the management, maintenance, repair, and insurance of the Real Property, and (ii) to the extent provided by law, shall collect all rents and other income and proceeds and other rights generated from the Real Property and any insurance proceeds.

2.11 Should Borrower at any time become aware of the occurrence of any material loss, damage, destruction, waste, presence or release of any hazardous substance, or nuisance upon or from the Real Property (in each case, as determined by GAAP), Borrower shall promptly report to Lender, Borrower’s findings and such other information related to such occurrence as Lender may reasonably request.

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2.12 Borrower shall take all commercially reasonable steps necessary or appropriate to perfect, and maintain the perfected status and priority, of all security for the Pledged Loan, including, but not limited to, the perfected status and priority of the Pledged Deed of Trust and all other security interests in personal property and/or real property security. Without limiting the generality of the foregoing, Borrower shall cause to be filed at all appropriate locations all such financing statements as shall be required or permitted pursuant to the Pledged Loan, and all continuation statements extending the financing statements.

3. Representations, Warranties, Covenants and Waivers

Borrower hereby covenants, represents and warrants with and to Lender that (all of such covenants, representations and warranties being continuing in nature so long as any of the Obligations are outstanding):

3.1 There are no material documents or agreements between Collateral Loan Obligors and Borrower relating to the Pledged Loan except the Pledged Note, the Pledged Deed of Trust and any other documents which have been delivered to Lender.

3.2 To the best of Borrower’s knowledge, the Pledged Property is directly, legally and beneficially owned by Borrower free and clear of all claims, liens, pledges and encumbrances of any kind, nature or description except for the first and prior pledge and security interest with respect thereto in favor of Lender, and no participations in the Pledged Property have been granted or promised by Borrower to any third party.

3.3 The Pledged Property is not subject to any restrictions relative to the transfer thereof, and Borrower has the right to transfer and hypothecate the Pledged Property free and clear of any liens, encumbrances or restrictions except as otherwise provided herein.

3.4 The Pledged Property is duly and validly pledged to Lender, and no consent or approval of any other third party was or is necessary to the validity and enforceability of this Pledge.

3.5 Borrower authorizes Lender to (i) store, deposit and safeguard the Pledged Property; (ii) after the occurrence and during the continuation of an Event of Default, perform any and all other acts which Lender in good faith deems reasonable and/or necessary for the protection and preservation of Lender’s security interest in the Pledged Property, including, without limitation, transferring, or arranging for the transfer of the Pledged Property to or in Lender’s own name and receiving the income therefrom as additional collateral for the Obligations; and (iii) pay any charges or expenses which Lender deems necessary for the foregoing purposes, but without any obligation to do so. Any obligation of Lender for reasonable care for the Pledged Property in Lender’s possession shall be limited to the same degree of care which Lender uses for similar property owned by Lender.

3.6 Borrower will pay all charges and assessments of any nature against the Pledged Property or with respect hereto prior to said charges and/or assessments being delinquent.

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3.7 Borrower shall promptly reimburse Lender on demand, together with interest at the rate provided in the Note, for any charges, assessments or expenses paid or incurred by Lender in its discretion for the protection and preservation and maintenance of the Pledged Property and the enforcement of Lender’s rights hereunder, including, without limitation, reasonable attorneys’ fees and legal expenses incurred by Lender in seeking to protect, collect or enforce its rights in the Pledged Property or otherwise hereunder.

3.8 Borrower shall furnish Lender with such information concerning Obligor and the Pledged Property that has been delivered by Obligor to Borrower, as Lender may from time to time request, including, without limitation, current financial statements of Obligor or status of any foreclosure proceeding.

3.9 Except as otherwise contemplated by the Loan Agreement with respect to the removal of Pledged Loans included in the Borrowing Base at Borrower’s request, during the term of this Pledge, Borrower shall not directly or indirectly sell, assign, transfer, grant participation in or otherwise dispose of, or grant any option with respect to the Pledged Property included in the Borrowing Base, nor shall Borrower create, incur or (to the extent under Borrower’s control) permit any further pledge, hypothecation, encumbrance, lien, mortgage or security interest with respect to the Pledged Property included in the Borrowing Base; provided that Borrower shall be permitted to sell Pledged Loans to third parties in arm-length transactions in the ordinary course of its business.

3.10 During the term of this Pledge, Borrower shall not materially modify, extend, or renew any terms of the Pledged Property, or release the lien of the Pledged Property without the prior consent of Lender, such consent not to be unreasonably withheld or delayed, except as otherwise contemplated by Section 5.2 of the Loan Agreement; provided that if such Pledged Property is included in the Borrowing Base, Borrower shall give Lender at least three Business Days’ prior written notice of any modification, extension or renewal. Borrower shall promptly provide Lender written notice and a copy of any amendment, modification or waiver made with respect to the Pledged Property.

3.11 Borrower shall reasonably perform such further reasonable acts and execute such additional reasonable instruments as are reasonably required by Lender to effectuate and implement this Pledge and the provisions hereof.

3.12 Borrower waives (i) the defense of the statute of limitations in any action upon any of the Obligations; and (ii) any right of subrogation or interest in the Obligations or Pledged Property until all Obligations have been indefeasibly paid in full. Lender is entitled to all of the benefits of a secured party set forth in Section 47-9207 of the UCC.

3.13 Collateral Loan Obligor is the sole obligor under the applicable Pledged Note.

3.14 The Pledged Note and the Pledged Deed of Trust and each of the Additional Pledged Loan Documents are currently in full force and effect in accordance with their terms and are the only agreements between the parties thereto pertaining to the indebtedness described in the Pledged Note; and the security interest in and lien upon the Real Property created by the Pledged Deed of Trust is valid and enforceable.

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3.15 Neither Borrower nor Obligor is in breach or default of their obligations under any terms or conditions of the Pledged Note, Pledged Deed of Trust or any of the Additional Pledged Loan Documents beyond all applicable notice and cure periods.

3.16 Borrower hereby confirms and agrees that there have been no material changes, additions, modifications or amendments to the Pledged Notes, Pledged Deeds of Trust or any of the Additional Pledged Loan Documents; provided that if such Pledged Property is included in the Borrowing Base, Borrower shall deliver evidence of such change, addition or modification to Lender as set forth in Section 3.10 hereto.

3.17 To Borrower’s knowledge, Obligor has no defense, charge, claim of offset, or other claims under the Pledged Note, Pledged Deed of Trust or any of the Additional Pledged Loan Documents, or otherwise, against payments due or to become due thereunder.

3.18 Borrower will execute an Allonge for the Pledged Note which is to be attached to the Pledged Note, and Borrower has delivered to Lender the Pledged Note.

4. Events of Default

The occurrence of an Event of Default under the Loan Agreement shall constitute and be deemed an Event of Default under this Pledge.

5. Remedies After Default

Upon the occurrence and during the continuation of an Event of Default:

5.1 In addition to all the rights and remedies of a secured party under applicable law (including the UCC), Lender shall have the right, at any time and without demand of performance or other demand, advertisement or notice of any kind (except the notice specified below of time and place of public or private sale) to or upon Borrower or any other person (all and each of which demand, advertisements and/or notices are hereby expressly waived to the extent permitted by law), to proceed forthwith to collect, redeem, receive, appropriate, sell, or otherwise dispose of and deliver the Pledged Property or any part thereof in one or more lots at public or private sale or sales at Lender’s offices or elsewhere at such prices and on such terms as Lender may deem best. The foregoing disposition(s) must be for cash or on credit or for future delivery without assumption of any credit risk by Lender, with Lender having the right to purchase all or any part of said Pledged Property so sold at any such sale or sales, public or private, free of any right or equity of redemption in Borrower, which right or equity is hereby expressly waived or released by Borrower. The proceeds of any such collection, redemption, recovery, receipt, appropriation, realization, sale or other disposition, after deducting all reasonable costs and expenses of every kind incurred relative thereto or incidental to the care, safekeeping or otherwise of any and all Pledged Property or in any way relating to the rights of Lender hereunder (including, without limitation, reasonable, third-party attorneys’ fees and legal expenses) shall be applied first to the satisfaction of the Obligations (in such order as Lender may elect and whether or not due) and then to the payment of any amounts required by applicable law, including Section 47-9610 of the UCC. Borrower shall be liable to Lender for the payment on demand of all such costs and expenses, together with interest at the default rate set forth in the Note, together with any reasonable attorneys’ fees if placed with an attorney for collection or enforcement. Borrower agrees that ten (10) days’ prior notice by Lender of the date after which a private sale may take place or a public auction may be held is reasonable notification of such matters and shall be deemed commercially reasonable under the UCC.

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5.2 All of the Lender’s rights and remedies, including but not limited to the foregoing and those otherwise arising under this Pledge, the Other Agreements, the instruments, agreements and securities comprising the Pledged Property, applicable law or otherwise, shall be cumulative and not exclusive and shall be enforceable alternatively, successively or concurrently as Lender may deem expedient. No failure or delay on the part of Lender in exercising any of its options, powers or rights or partial or single exercise thereof shall constitute a waiver of such option, power or right.

5.3 Borrower agrees to pay to Lender, on demand, all reasonable, third party attorneys’ fees and all other costs and expenses incurred by Lender in the collection or attempted collection from Borrower of any Obligations and/or in the interpretation, enforcement or attempted enforcement by Lender of this Pledge or any other Loan Documents (as defined in the Loan Agreement), including, but not limited to, proceedings in any bankruptcy or other insolvency case or other proceedings concerning the Obligations, this Pledge or any other Loan Documents, in any manner, whether or not legal proceedings or suit are instituted, together with interest thereon at the rate applicable to the Note and including, without limitation, all attorneys’ fees and related costs of enforcement of any and all judgments and awards and upon any appeal relating thereto.

6. Further Assurances

Borrower agrees that at any time and from time to time upon the commercially reasonable written request of Lender, Borrower will execute and deliver such further commercially reasonable documents in form satisfactory to counsel for Lender, and will take or cause to be taken such further commercially reasonable acts as Lender may request in order to effect the purposes of this Pledge and perfect or continue the perfection of the security interest in the Pledged Property granted to Lender hereunder.

7. Miscellaneous

7.1 Except as otherwise provided in the Loan Documents , beyond the exercise of reasonable care to assure the safe custody of the Pledged Property while held by Lender hereunder, as provided in Section 3.5 hereof, Lender or Lender’s agent or bailee shall have no duty or liability to protect or preserve any rights pertaining thereto. Lender shall have no obligation or duty to return or release its security interest in the Pledged Property except upon the written request of Borrower, at the sole expense of Borrower and only after all Obligations are indefeasibly paid in full.

7.2 No course of dealing between Borrower and Lender, nor any failure or delay by Lender to exercise any right, power or privilege under this Pledge, the Other Agreements or under any other agreements, instruments and documents executed and delivered in connection therewith shall operate as a waiver hereof or thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or thereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege. No waiver of any provision of this Pledge shall be effective unless the same shall be in writing and signed by Lender, and then such waiver shall be effective only in the specific instance and for the purpose for which given.

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7.3 This Pledge may not be changed, modified or amended, in whole or in part, except by a writing signed by Borrower and Lender. Obligor is not a party to or third party beneficiary of this Pledge, the Loan Agreement or the Note.

7.4 The provisions of this Pledge and the Other Agreements are severable, and if any clause or provision hereof or thereof shall be held invalid or unenforceable in whole or in part or in any jurisdiction, then such invalidity or unenforceability shall attach only to such clause or provision in any such jurisdiction or part hereof and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision in this Pledge or the Other Agreements in any jurisdiction.

7.5 This Pledge shall inure to the benefit of Borrower and Lender and their respective successors and assigns, and shall be binding upon Borrower and its successors and assigns until all of the Obligations have been indefeasibly paid in full.

7.6 BORROWER ACKNOWLEDGES THAT LENDER HAS EXTENDED OR MAY IN THE FUTURE EXTEND CREDIT TO BORROWER IN RELIANCE ON THE UNCONDITIONAL PLEDGE OF THE PLEDGED PROPERTY AS COLLATERAL SECURITY FOR THE PAYMENT AND PERFORMANCE WHEN DUE OF EACH AND EVERY ONE OF THE OBLIGATIONS, AND THE WAIVERS, WARRANTIES AND PROMISES MADE BY BORROWER IN THIS PLEDGE ARE REQUIRED TO ESTABLISH THE OBLIGATIONS OF BORROWER TO LENDER. BORROWER AGREES THAT EACH OF THE WAIVERS, WARRANTIES AND PROMISES SET FORTH IN THIS PLEDGE ARE MADE WITH BORROWER’S UNDERSTANDING OF THEIR SIGNIFICANCE AND CONSEQUENCES AND THAT THEY ARE REASONABLE. IF ANY WAIVERS, WARRANTIES AND PROMISES ARE DETERMINED TO BE CONTRARY TO ANY APPLICABLE LAW OR PUBLIC POLICY, THE SAME SHALL BE EFFECTIVE TO THE MAXIMUM EXTENT PERMITTED BY LAW.

7.7 BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR ANY OF LENDER’S OFFICERS OR EMPLOYEES HAVE MADE ANY PROMISE OR REPRESENTATION, WHETHER ORAL, WRITTEN OR IMPLIED, NOT INCORPORATED IN THIS PLEDGE, TO CAUSE BORROWER TO SIGN THIS DOCUMENT. THIS PLEDGE IS NOT SIGNED IN RELIANCE ON ANY PROMISE, CONDITION OR THE OCCURRENCE OF ANY EVENT AND THERE ARE NO ORAL UNDERSTANDINGS, STATEMENTS OR AGREEMENTS BETWEEN THE PARTIES WHICH HAVE NOT BEEN INCLUDED IN THIS PLEDGE.

7.8 JURY WAIVER. BORROWER WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO WHICH BORROWER AND LENDER MAY BE PARTIES, ARISING OUT OF, IN CONNECTION WITH OR IN ANY WAY PERTAINING TO, THIS PLEDGE, THE NOTE OR ANY OF THE OTHER LOAN DOCUMENTS. IT IS AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY OF ALL CLAIMS AGAINST ALL PARTIES TO SUCH ACTION OR PROCEEDINGS, INCLUDING CLAIMS AGAINST PARTIES WHO ARE NOT PARTIES TO THIS PLEDGE. THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER, AND BORROWER HEREBY REPRESENTS THAT NO REPRESENTATIONS OF FACT OR OPINION HAVE BEEN MADE BY ANY INDIVIDUAL TO INDUCE THIS WAIVER OF TRIAL

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BY JURY OR TO IN ANY WAY MODIFY OR NULLIFY ITS EFFECT. BORROWER FURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS PLEDGE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED HEREIN OR IN THE OTHER LOAN DOCUMENTS.

Borrower has initialed this Section 7.8 to further indicate its awareness and acceptance of each and every vision hereof.

Borrower’s Initials

8. Governing Law

This Pledge shall be deemed to have been made in California, and this Pledge shall be governed by and construed and enforced in accordance with the laws of the State of California.

9. Schedule 1 May be Amended and Supplemented

Schedule 1 attached hereto may be amended or supplemented from time to time, pursuant to a written amendment or supplement executed by Borrower and Lender, but regardless of whether Schedule 1 is supplemented, Pledged Notes shall include all promissory notes executed by a party in favor of Borrower which are in possession of Lender.

[THIS SPACE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the undersigned has caused these presents to be duly executed and delivered on the day and year first above written.

BORROWER:
REDWOOD MORTGAGE INVESTORS IX, LLC, a Delaware limited liability company, as Borrower
By:	/s/ Michael R. Burwell
	Name: Michael R. Burwell
	Title:   President, Secretary and Treasurer
Address:
177 Bovet Road, suite 520
San Mateo, CA 94402
LENDER:
WESTERN ALLIANCE BANK, an Arizona corporation
By:	/s/ Seth Davis
	Name: Seth Davis
-	Title:   Senior Vice President
Address:
2701 E. Camelback Road, Suite #110
Phoenix, Arizona 85016

Signature Page to

Pledge and Security Agreement

SCHEDULE 1

EX-10.2

EXHIBIT 10.2

SECURED PROMISSORY NOTE

$850,000.00 September 30, 2020

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Redwood Mortgage Investors VIII, a California limited partnership (“Maker”), promises to pay to Redwood Mortgage Investors IX, LLC, a Delaware limited liability company (“Payee”), the principal sum of Eight Hundred and Fifty Thousand Dollars ($850,000.00) (“Principal”) together with interest as provided in this Secured Promissory Note (“Note”) and on the following terms and conditions:

1. Secured Note. This Note is secured by that certain Pledge and Security Agreement of even date herewith, entered into by and between Maker and Payee (the “Pledge Agreement”). All capitalized terms not otherwise defined herein shall have the meanings given in the Pledge Agreement.

2. Maturity Date. All unpaid Principal, Interest and any and all other sums payable to Payee under this Note shall be due and payable, in full, on the earlier of: (i) the closing of the Purchase Transaction contemplated in the Pledge Agreement; and (ii) November 30, 2020 (the “Maturity Date”).

3. Interest. In addition to the repayment of the Principal amount of this Note, Maker shall pay to Payee interest in the amounts provided herein (collectively referred to herein as “Interest”).

(a) If Principal is repaid to Payee upon the closing of the Purchase Transaction, Interest payable to Payee on the corresponding Maturity Date shall be Interest equal to the sum of following: (i) Interest in an amount equal to the Payee’s Pro Rata Share of the weighted average interest that accrues on the Loans Held for Sale from the date of this Note through the closing of the Purchase Transaction and corresponding Maturity Date; and (ii) Payee’s Pro Rata Share of any prepayment premium payable to Maker in the Purchase Transaction. For the purposes of this Note, the Payee’s “Pro Rata Share” means the fraction, expressed as a percentage, the numerator of which is the aggregate principal balance of the Loans Held for Sale and the denominator of which is the Principal amount of this Note as of the Purchase Transaction closing and corresponding Maturity Date.

(b) If the Purchase Transaction fails to close by the November 30, 2020, Maturity Date or the provisions of subsection (a) are otherwise inapplicable: (i) Interest payable to Payee on the Maturity Date shall be equal to the Payee’s Pro Rata Share of the weighted average interest that accrues on the Loans Held for Sale from the date of this Note through the Maturity Date; and (ii) Payees Pro Rata Share of the prepayment premium described in subsection (a)(ii) above shall be payable to Maker if and when the Purchase Transaction is closed and the prepayment premium is paid by the purchaser.

4. Payment. No payments shall be due from Maker under this Note prior to the Maturity Date. On the Maturity Date, Maker shall make a lump sum payment to Payee which shall include all unpaid Principal, all Interest and any and all other sums due under this Note. This Note may be prepaid at any time by paying all unpaid Principal and all Interest payable as of the date of prepayment. All payments made by Maker hereunder shall be applied first to Interest, then to the outstanding Principal.

5. Default. The occurrence of any of the following (each, an “Event of Default”), shall constitute a default hereunder:

(a) Failure of Maker to pay all amounts due under this Note on the Maturity Date.

(b) Default in the performance of any obligation contained in the Pledge Agreement or any other instrument (including any amendment, modification or extension thereof) given by Maker for the purpose of securing this Note.

(c) Maker shall commence (or take any action for the purpose of commencing) or Maker shall have commenced against it any proceeding under any bankruptcy, reorganization, readjustment of debt or similar law or statute, a receiver, trustee or custodian is appointed for a substantial part of Maker’s assets, Maker makes assignment for the benefit of creditors, or Maker is otherwise deemed to be insolvent.

6. Remedies. Upon the occurrence of any Event of Default, Payee, at its option and without further notice, demand, or presentment for payment to Maker or others, may declare immediately due and payable the unpaid Principal balance of this Note and all Interest payable thereon together with all other sums owed by Maker under this Note. Payment of such sums may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to Payee under this Note and the Pledge Agreement.

7. Remedies Cumulative. The rights and remedies of Payee provided in this Note and the Pledge Agreement are cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion Payee, and may be exercised as often as

35701.3 16918448.2

occasion therefor shall occur. The failure of the Payee to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

8. Costs. Maker agrees to pay immediately upon demand all costs, expenses and fees, including without limitation reasonable attorneys’ fees incurred by Payee in any proceeding for the collection of the debt evidenced by this Note, in any litigation or controversy arising from or connected with the enforcement of this Note or the Pledge Agreement, and/or in any proceedings to enforce payment of Maker’s obligations hereunder by an action or participation in, or in connection with, a case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code, or any successor statute thereto.

9. Assignment. This Note may not be assigned, transferred, pledged or hypothecated by Maker without the prior written consent of Payee, which may be withheld by Payee in its sole discretion. Payee shall have the absolute right to assign this Note without Maker’s consent

10. Severability. If any provision of this Note, or the application of it to any party or circumstance is held to be invalid, such provision shall be ineffective, but the remainder of this Note, and the application of such provision to the other parties or circumstances, shall not be affected thereby.

MAKER:	REDWOOD MORTGAGE INVESTORS VIII
	a California limited partnership
	By:	Redwood Mortgage Corp.,
		a California corporation, its General Partner
		By:	/s/ Michael Burwell
			Michael Burwell, President

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35701.3 16955818.1

PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement (this “Agreement”)is made and entered into on September 30, 2020, (“Effective Date”)by and between Redwood Mortgage Investors IX, LLC, a Delaware limited liability company (the “Secured Party”),and Redwood Mortgage Investors VIII, a California limited partnership (“Pledgor”),with reference to the following facts:

RECITALS

A. Contemporaneously herewith, Secured Party has made a short term loan to Pledgor in the amount of $850,000 (the “Loan”). which Loan is evidenced by the that certain Secured Promissory Note made by Pledgor in favor of Secured Party and dated as of the Effective Date hereof (the “Secured Note”).

B. Peldgor is a mortgage fund in the business of making loans secured by California real estate and, as of the Effective Date, Pledgor is holding the loans identified in Exhibit A of this agreement for sale to third parties (the “Loans Held for Sale”). Pledgor has received and is assessing competing bids for the purchase of its Loans Held for Sale and currently expects that a purchase and sale transaction with one of existing bidders will occur and be closed in October or November of 2020 (the “Purchase Transaction”). Pledgor also intends to utilize the proceeds from the Loan Purchase Transaction to: (i) repay all of Pledgor’s obligations due to Western Alliance Bank (“Credit Line Lender”)under its existing credit line with Credit Line Lender (“Credit Line Agreement”)that are secured by the Loans Held for Sale (as applicable) (the “Credit Line Obligations”);and (ii) repay all of the obligations due to Secured Party under the Secured Note.

D. Secured Party is only willing to make the Loan to Pledgor on theexpress condition that the Loan and Pledgor’s obligations to Secured Party under the Secured Note be secured by a pledge of Pledgor’ s interest in the Purchase Transaction proceeds (net of the Credit Line Obligations), Pledgor’s right to receive payments under the Loans Held for Sale (after payment of all applicable Credit Line Obligations) and all other Collateral (as defined herein) onthe terms set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, the parties hereby agree as follows:

I. Recitals. The above stated Recitals are true and correct as of the Effective Date and are hereby incorporated into this Agreement in their entirety.

2. Pledge of Collateral. Pledgor hereby pledges and grants to Secured Party, as collateral security for the prompt and complete payment and performance of the Obligations (as defined in Section 3, below), a first priority security interest in all right title and interest of Pledgor, whether now existing or hereafter from time to time arising or acquired in and to the following (“Collateral”):

(a) all sale proceeds payable to Pledgor from the Purchase Transaction and any other sale of the Loans Held for Sale to the extent they exceed the Credit Line Obligations with respect the Loans Held For Sale (as applicable);

(b) all payment premiums payable to Pledgor with respect to the sale of any of the Loans Held for Sale, whether in a currently contemplated Purchase Transaction or otherwise; and

(c) all payments of principal, interest and other monies due or to become due with respect to the Loans Held for Sale in excess of the Credit Line Obligations payable with respect to any Loans Held For Sale (as applicable); and

(d) all claims, rights and interests in proceeds, collections, and recoveries with respect to the foregoing.

3. Secured Obligations. The pledge set forth in Section 2, is made by Pledgor in favor of Secured Party to secure the prompt and complete performance of Pledgor’s obligations under the Secured Note and this Agreement (collectively, the “Obligations”).

4. Perfection of Security Interest. This Agreement shall constitute a security agreement under California Uniform Commercial Code (“UCC”). Pledgor acknowledges that the perfection of the security interest provided for herein shall be made by filing a financing statement in the form attached hereto as Exhibit B (“Financing Statement”) with the California Secretary of state. Pledgor hereby authorized Secured Party to file the Financing Statement and to take any other actions and make any other filings Secured Party deems necessary to perfect or continue the perfection of the security interest granted by Pledgor under this Agreement.

5. Representations and Warranties; Covenants.

(a) Pledgor hereby represents and warrants to the Secured Party that Pledgor has good title (to the Collateral, free and clear of all claims, pledges, security interests, liens or encumbrances of every nature whatsoever.

16918003.2

(b) Pledgor agrees that, until the Obligations are fully satisfied, Pledgor will not (whether voluntarily, involuntarily or by operation of law) sell, assign, dispose or otherwise transfer (or attempt to sell, assign, dispose or otherwise transfer), or grant or create (or attempt to grant or create) any security interest, lien, pledge, claim or other encumbrance with respect to, any of the Collateral. Any transfer or encumbrance of any Collateral in violation of this Section 5(b) shall be deemed null and void ab initio.

6. Rights on Default. Upon the occurrence of a default by Pledgor with respect the Obligations, Secured Party shall have all of the rights and remedies granted to the Secured Party under the UCC and any other applicable laws, and such rights, powers and remedies will be exercisable by the Secured Party with respect to all or any portion of the Collateral.

7. Further Assurances. Pledgor and Secured Party hereby agree that, from time to time, Pledgor will promptly execute, deliver and file such instruments, certificates and documents and take such further acts as the Secured Party may reasonably request in order to perfect, preserve, protect and defend the pledge or security interest granted or purported to be granted hereunder or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any or all of Collateral.

8. Waiver. No failure, forbearance or delay by the Secured Party to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant or agreement or of any such breach, or preclude the Secured Party from exercising any such right, power or remedy at any later time or times. No waiver of any of the provisions contained in this Agreement shall be valid unless made in writing and executed by the waiving party.

9. Miscellaneous.

(a) Th is Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to any conflict of laws principles of that or any other jurisdiction.

(b) This Agreement and the Secured Note constitute the entire agreement between the parties with respect to the subject matter hereof, and supersede any prior agreements with respect to the subject matter hereof.

(c) If any provision of this Agreement is held to be invalid or unenforceable, the invalidity or enforceability of any such provision shall not affect the validity or enforceability of any other provision hereof. This Agreement may not be assigned by either party without the prior written consent of the other party. Any assignment in violation of this Section 9(c) shall be null and void. This Agreement shall (i) be binding upon the Pledgor’s successors and assigns and (ii) inure to the benefit of the successors and permitted assigns of the Secured party.

(d) If any dispute between the parties under this Agreement or the Secured Note results in litigation or arbitration, the prevailing party shall be entitled to recover all reasonable costs incurred by such party in connection with such action, including, but not limited to, reasonable attorneys’ fees and expenses and, if Secured Party is the prevailing party, Secured Party’s reasonable collection costs.

(e) All headings are used herein for convenience of reference only and shall not be used to construe or interpret this Agreement. Unless varied by this Agreement, all terms used herein which are defined by the Delaware Uniform Commercial Code shall have the same meanings hereunder as assigned to them by the Delaware Uniform Commercial Code.

16918003.2

IN WITNESS WHEREOF, the parties hereto have executed this Pledge & Security Agreement effective as of the Effective Date.

SECURED PARTY			PLEDGOR:
REDWOOD MORTGAGE INVESTORS IX, LLC			REDWOOD MORTGAGE INVESTORS VIII
a Delaware limited liability company			a California limited partnership
By:	Redwood Mortgage Corp.,		By:	Redwood Mortgage Corp.,
	a California corporation, its Manager			a California corporation, its General Partner
	By:	/s/ Michael Burwell		By:	/s/ Michael Burwell
		Michael Burwell, President			Michael Burwell, President

16918003.2

EXHIBIT A

LOANS HELD FOR SALE

Loan Number.	Name of Borrower	Original Principal Balance
4715	University J, LLC	$	1,600,000.00
4683	Clara J., LLC	$	2,300,000.00

16918003.2

EX-10.3

Exhibit 10.3

SECURED PROMISSORY NOTE

$800,000.00 October 19, 2020

FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Redwood Mortgage Investors IX, LLC, a Delaware limited liability company (“Maker”), promises to pay to Redwood Mortgage Investors VIII, a California limited partnership (“Payee”), the principal sum of Eight Hundred Thousand Dollars ($800,000.00) (“Principal”) together with interest as provided in this Secured Promissory Note (“Note”) and on the following terms and conditions:

1.Secured Note.  This Note is secured by that certain Pledge and Security Agreement of even date herewith, entered into by and between Maker and Payee (the “Pledge Agreement”).  All capitalized terms not otherwise defined herein shall have the meanings given in the Pledge Agreement.

2.Maturity Date.  Allunpaid Principal, Interest and any and all other sums payable to Payee under this Note shall be due and payable, in full, on the earlier of: (i) the closing of the Purchase Transaction contemplated in the Pledge Agreement; and (ii) November 30, 2020 (the “Maturity Date”).  

3.Interest.  In addition to the repayment of the Principal amount of this Note, Maker shall pay to Payee interest in the amounts provided herein (collectively referred to herein as “Interest”).  

(a)If Principal is repaid to Payee upon the closing of the Purchase Transaction, Interest payable to Payee on the corresponding Maturity Date shall be Interest equal to the sum of following: (i) Interest in an amount equal to the Payee’s Pro Rata Share of the weighted average interest that accrues on the Loans Held for Sale from the date of this Note through the closing of the Purchase Transaction and corresponding Maturity Date; and (ii) Payee’s Pro Rata Share of any prepayment premium payable to Maker in the Purchase Transaction.  For the purposes of this Note, the Payee’s “Pro Rata Share” means the fraction, expressed as a percentage, the numerator of which is the aggregate principal balance of the Loans Held for Sale and the denominator of which is the Principal amount of this Note as of the Purchase Transaction closing and corresponding Maturity Date.    

(b)If the Purchase Transaction fails to close by the November 30, 2020, Maturity Date or the provisions of subsection (a) are otherwise inapplicable: (i) Interest payable to Payee on the Maturity Date shall be equal to the Payee’s Pro Rata Share of the weighted average interest that accrues on the Loans Held for Sale from the date of this Note through the Maturity Date; and (ii) Payees Pro Rata Share of the prepayment premium described in subsection (a)(ii) above shall be payable to Maker if and when the Purchase Transaction is closed and the prepayment premium is paid by the purchaser.

4.Payment.  No payments shall be due from Maker under this Note prior to the Maturity Date.  On the Maturity Date, Maker shall make a lump sum payment to Payee which shall include all unpaid Principal, all Interest and any and all other sums due under this Note.  This Note may be prepaid at any time by paying all unpaid Principal and all Interest payable as of the date of prepayment.  All payments made by Maker hereunder shall be applied first to Interest, then to the outstanding Principal.

5.Default.  The occurrence of any of the following (each, an “Event of Default”), shall constitute a default hereunder:  

(a)Failure of Maker to pay all amounts due under this Note on the Maturity Date.  

(b)Default in the performance of any obligation contained in the Pledge Agreement or any other instrument (including any amendment, modification or extension thereof) given by Maker for the purpose of securing this Note.

(c)Maker shall commence (or take any action for the purpose of commencing) or Maker shall have commenced against it any proceeding under any bankruptcy, reorganization, readjustment of debt or similar law

35701.3 16955818.2

or statute, a receiver, trustee or custodian is appointed for a substantial part of Maker’s assets, Maker makes assignment for the benefit of creditors, or Maker is otherwise deemed to be insolvent.

6.Remedies. Upon the occurrence of any Event of Default, Payee, at its option and without further notice, demand, or presentment for payment to Maker or others, may declare immediately due and payable the unpaid Principal balance of this Note and all Interest payable thereon together with all other sums owed by Maker under this Note. Payment of such sums may be enforced and recovered in whole or in part at any time by one or more of the remedies provided to Payee under this Note and the Pledge Agreement.

7.Remedies Cumulative. The rights and remedies of Payee provided in this Note and the Pledge Agreement are cumulative and concurrent and may be pursued singly, successively or together, at the sole discretion Payee, and may be exercised as often as occasion therefor shall occur. The failure of the Payee to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

8.Costs. Maker agrees to pay immediately upon demand all costs, expenses and fees, including without limitation reasonable attorneys' fees incurred by Payee in any proceeding for the collection of the debt evidenced by this Note, in any litigation or controversy arising from or connected with the enforcement of this Note or the Pledge Agreement, and/or in any proceedings to enforce payment of Maker's obligations hereunder by an action or participation in, or in connection with, a case or proceeding under Chapter 7, 1l or 13 of the Bankruptcy Code, or any successor statute thereto.

9.Assignment. This Note may not be assigned, transferred, pledged or hypothecated by Maker without the prior written consent of Payee, which may be withheld by Payee in its sole discretion. Payee shall have the absolute right to assign this Note without Maker's consent

10.Severability. If any provision of this Note, or the application of it to any party or circumstance is held to be invalid, such provision shall be ineffective, but the remainder of this Note, and the application of such provision to the other parties or circumstances, shall not be affected thereby.

MAKER:	REDWOOD MORTGAGE INVESTORS IX, LLC
	a Delaware limited liability company
	By:	Redwood Mortgage Corp.,
		a California corporation, its General Partner
		By:	/s/ Michael Burwell
			Michael Burwell, President

2

35701.3 16955818.2

PLEDGE AND SECURITY AGREEMENT

This Pledge and Security Agreement (this “Agreement”) is made and entered into on October 14, 2020, (“Effective Date”) by and between Redwood Mortgage Investors VIII, a California limited partnership (the “Secured Part”), and Redwood Mortgage Investors IX, LLC, a Delaware limited liability company (“Pledgor”), with reference to the following facts:

RECITALS

A.Contemporaneously herewith, Secured Party has made a short term loan to Pledgor in the amount of $800,000 (the “Loan”). which Loan is evidenced by the that certain Secured Promissory Note made by Pledgor in favor of Secured Party and dated as of the Effective Date hereof (the “Secured Note”).

B.Peldgor is a mortgage fund in the business of making loans secured by California real estate and, as of the Effective Date, Pledgor is holding the loans identified in Exhibit A of this agreement for sale to third parties (the “Loans Held for Sale”). Pledgor has received and is assessing competing bids for the purchase of its Loans Held for Sale and currently expects that a purchase and sale transaction with one of existing bidders will occur and be closed in October or November of 2020 (the “Purchase Transaction”). Pledgor also intends to utilize the proceeds from the Loan Purchase Transaction to: (i) repay all of Pledgor’s obligations due to Western Alliance Bank (“Credit Line Lender”) under its existing credit line with Credit Line Lender (“Credit Line Agreement”) that are secured by the Loans Held for Sale (as applicable) (the “Credit Line Obligations”); and (ii) repay all of the obligations due to Secured Party under the Secured Note.

C.Secured Party is only willing to make the Loan to Pledgor on the express condition that the Loan and Pledgor’s obligations to Secured Party under the Secured Note be secured by a pledge of Pledgor’s interest in the Purchase Transaction proceeds (net of the Credit Line Obligations), Pledgor’s right to receive payments under the Loans Held for Sale (after payment of all applicable Credit Line Obligations) and all other Collateral (as defined herein) on the terms set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, the parties hereby agree as follows:

1.Recitals. The above stated Recitals are true and correct as of the Effective Date and are hereby incorporated into this Agreement in their entirety.

2.Pledge of Collateral. Pledgor hereby pledges and grants to Secured Party, as collateral security for the prompt and complete payment and performance of the Obligations (as defined in Section 3, below), a first priority security interest in all right title and interest of Pledgor, whether now existing or hereafter from time to time arising or acquired in and to the following (“Collateral”):

(a)all sale proceeds payable to Pledgor from the Purchase Transaction and any other sale of the Loans Held for Sale to the extent they exceed the Credit Line Obligations with respect the Loans Held For Sale (as applicable);

(b)all payment premiums payable to Pledgor with respect to the sale of any of the Loans Held for Sale, whether in a currently contemplated Purchase Transaction or otherwise; and

(c)all payments of principal, interest and other monies due or to become due with respect to the Loans Held for Sale in excess of the Credit Line Obligations payable with respect to any Loans Held For Sale (as applicable); and

(d)all claims, rights and interest in proceeds, collections, and recoveries with respect to the foregoing.

16955978.1

3.Secured Obligations.The pledge set forth in Section 2, is made by Pledgor in favor of Secured Party to secure the prompt and complete performance of Pledgor’s obligations under the Secured Note and this Agreement (collectively, the “Obligations”).

4.Perfection of Security Interest. This Agreement shall constitute a security agreement under California Uniform Commercial Code (“UCC”). Pledgor acknowledges that the perfection of the security interest provided for herein shall be made by filing a financing statement in the form attached hereto as Exhibit B (“Financing Statement”) with the California Secretary of State. Pledgor hereby authorized Secured Party to file the Financing Statement and to take any other actions and make any other filings Secured Party deems necessary to perfect or continue the perfection of the security interest granted by Pledgor under this Agreement.

5.Representations and Warranties; Covenants.

(a)Pledgor hereby represents and warrants to the Secured Party that Pledgor has good title (to the Collateral, free and clear of all claims, pledges, security interests, liens or encumbrances of every nature whatsoever.

(b)Pledgor agrees that, until the Obligations are fully satisfied, Pledgor will not (whether voluntarily, involuntarily or by operation of law) sell, assign, dispose or otherwise transfer (or attempt to sell, assign, dispose or otherwise transfer), or grant or create (or attempt to grant or create) any security interest, lien, pledge, claim or other encumbrance with respect to, any of the Collateral. Any transfer or encumbrance of any Collateral in violation of this Section 5(b) shall be deemed null and void ab initio.

6.Rights on Default. Upon the occurrence of a default by Pledgor with respect the Obligations, Secured Party shall have all of the rights and remedies granted to the Secured Party under the UCC and any other applicable laws, and such rights, powers and remedies will be exercisable by the Secured Party with respect to all or any portion of the Collateral.

7.Further Assurances. Pledgor and Secured Party hereby agree that, from time to time, Pledgor will promptly execute, deliver and file such instruments, certificates and documents and take such further acts as the Secured Party may reasonably request in order to perfect, preserve, protect and defend the pledge or security interest granted or purported to be granted hereunder or to enable the Secured Party to exercise and enforce its rights and remedies hereunder with respect to any or all of Collateral.

8.Waiver. No failure, forbearance or delay by the Secured Party to insist upon the strict performance of any term, condition, covenant or agreement of this Agreement, or to exercise any right, power or remedy consequent upon a breach thereof, shall constitute a waiver of any such term, condition, covenant or agreement or of any such breach, or preclude the Secured Parry from exercising any such right, power or remedy at any later time or times. No waiver of any of the provisions contained in this Agreement shall be valid unless made in writing and executed by the waiving party.

9.Miscellaneous.

(a)This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to any conflict of laws principles of that or any other jurisdiction.

(b)This Agreement and the Secured Note constitute the entire agreement between the parties with respect to the subject matter hereof, and supersede any prior agreements with respect to the subject matter hereof.

(c)If any provision of this Agreement is held to be invalid or unenforceable, the invalidity or enforceability of any such provision shall not affect the validity or enforceability of any other provision hereof. This Agreement may not be assigned by either party without the prior written consent of the other party. Any assignment in violation of this Section 9(c) shall be null and void. This Agreement shall (i) be binding upon the Pledgor’s successors and assigns and (ii) inure to the benefit of the successors and permitted assigns of the Secured party.

16955978.1

(d)If any dispute between the parties under this Agreement or the Secured Note results in litigation or arbitration, the prevailing party shall be entitled to recover all reasonable costs incurred by such party in connection with such action, including, but not limited to, reasonable attorneys’ fees and expenses and, if Secured Party is the prevailing party, Secured Party’s reasonable collection costs.

(e)All headings are used herein for convenience of reference only and shall not be used to construe or interpret this Agreement. Unless varied by this Agreement, all terms used herein which are defined by the Delaware Uniform Commercial Code shall have the same meanings hereunder as assigned to them by the Delaware Uniform Commercial Code.

IN WITNESS WHEREOF, the parties hereto have executed this Pledge & Security Agreement effective as of the Effective Date.

PLEDGOR:			SECURED PARTY:
REDWOOD MORTGAGE INVESTORS IX, LLC			REDWOOD MORTGAGE IVESTORS VIII
a Delaware limited liability company			a California limited partnership
By:	Redwood Mortgage Corp.,		By:	Redwood Mortgage Corp.,
	a California corporation. its Manager			a California corporation, its General Partner
	By:	/s/ Michael Burwell		By:	/s/ Michael Burwell
		Michael Burwell, President			Michael Burwell, President

16955978.1

EXHIBIT A

LOANS HELD FOR SALE

Loan Number.	Name of Borrower	Original Principal Balance
4683	Clara J., LLC	$2,300,000.00
4744	Afredo Muccino	$850,000.00
4775	Ablehed Family Trust	$2,000,000.00
4815	Entrust Group, Inc.	$1,007,500 .00
	Michael Campesino	$1,400,000.00

16955978.1

EX-31.1

Exhibit 31.1

PRESIDENT’S CERTIFICATION

I, Michael R. Burwell, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Redwood Mortgage Investors IX, LLC, a Delaware limited liability company (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15-d-15(f)) for the Registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

/s/ Michael R. Burwell

Michael R. Burwell, President,

(principal executive officer and principal financial officer)

Redwood Mortgage Corp.,

Manager

August 16, 2021

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Redwood Mortgage Investors IX, LLC (the “company”) on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), pursuant to 18 U.S.C. (S) 1350, as adopted pursuant to (S) 906 of the Sarbanes-Oxley Act of 2002, I, Michael R. Burwell, certify that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company at the dates and for the periods indicated.

A signed original of this written statement required by Section 906 has been provided to Redwood Mortgage Investors IX, LLC and will be retained by Redwood Mortgage Investors IX, LLC and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ Michael R. Burwell

Michael R. Burwell, President,

(principal executive officer and principal financial officer)

Redwood Mortgage Corp.,

Manager

August 16, 2021

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2021 shares
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2021
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
No Trading Symbol Flag	true
Entity Registrant Name	REDWOOD MORTGAGE INVESTORS IX
Entity Central Index Key	0001448038
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding	0
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Shell Company	false
Document Quarterly Report	true
Document Transition Report	false
Entity File Number	000-55601
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	26-3541068
Entity Address, Address Line One	177 Bovet Road
Entity Address, Address Line Two	Suite 520
Entity Address, City or Town	San Mateo
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94402
City Area Code	650
Local Phone Number	365-5341

XML

Balance Sheets - USD ($)	Jun. 30, 2021	Dec. 31, 2020
ASSETS
Cash, in banks	$ 1,199,048	$ 2,299,113
Loan payments in trust	49,954	130,898
Loans
Principal	79,876,199	82,274,807
Advances	24,539	14,331
Accrued interest	706,473	683,975
Prepaid interest	(148,000)
Loan balances secured by deeds of trust	80,459,211	82,973,113
Allowance for loan losses	(55,000)	(55,000)
Loan balances secured by deeds of trust, net	80,404,211	82,918,113
Debt issuance costs, net	41,103	68,506
Receivable from related party	56,387
Total assets	81,750,703	85,416,630
LIABILITIES AND MEMBERS’ CAPITAL
Accounts payable and accrued liabilities	103,418	99,516
Payable to related party	13,826	4,185
Line of credit	7,600,000	10,000,000
Total liabilities	7,717,244	10,103,701
Commitments and contingencies (Note 6)
Members’ capital, net	77,601,483	79,124,948
Receivable from manager (formation loan)	(3,568,024)	(3,812,019)
Members’ capital, net of formation loan	74,033,459	75,312,929
Total liabilities and members’ capital	$ 81,750,703	$ 85,416,630

XML

Statements of Income (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Revenue
Interest income	$ 1,705,119	$ 1,511,999	$ 3,384,828	$ 2,939,676
Interest expense	(123,469)	(46,744)	(259,680)	(46,744)
Net interest income	1,581,650	1,465,255	3,125,148	2,892,932
Late fees	23,396	4,954	32,765	13,002
Total revenue, net	1,605,046	1,470,209	3,157,913	2,905,934
Provision for (recovery of) loan losses				(75)
Operations expense
Mortgage servicing fees	51,988	44,058	103,960	86,331
Asset management fees	141,390	135,321	282,780	270,642
Costs from Redwood Mortgage Corp., net (Note 3)	79,466		144,262
Professional services	141,408	150,499	374,095	296,085
Other	12,082	7,280	22,698	7,347
Total operations expense	426,334	337,158	927,795	660,405
Net income	1,178,712	1,133,051	2,230,118	2,245,604
Members (99%)	1,166,925	1,121,720	2,207,817	2,223,147
Manager (1%)	$ 11,787	$ 11,331	$ 22,301	$ 22,457

XML

Statements of Income (Parenthetical) (Unaudited) - Redwood Mortgage Investors IX [Member]	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Members investment	99.00%	99.00%	99.00%	99.00%
Manager investment	1.00%	1.00%	1.00%	1.00%

XML

Statement of Changes in Members' Capital (Unaudited) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Beginning balance				$ 75,312,929
Net income		$ 1,178,712	$ 1,133,051	2,230,118	$ 2,245,604
Early withdrawal penalties	[1]			4,944	9,938
Ending balance		74,033,459		74,033,459
RMC [Member]
Early withdrawal penalties		2,311	12,200	10,627	21,933
Capital Members [Member]
Beginning balance		80,286,365	81,747,167	80,801,456	81,755,930
Net income		1,166,925	1,121,720	2,207,817	2,223,147
Organization and offering expenses allocated		(76,656)	(80,194)	(154,221)	(160,909)
Early withdrawal penalties		0
Ending balance		79,043,284	81,547,630	79,043,284	81,547,630
Capital Members [Member] | Earnings Distributed To Members [Member]
Partners capital accounts		(1,118,603)	(1,115,768)	(2,244,994)	(2,246,645)
Capital Members [Member] | Earnings Distributed Used In DRIP [Member]
Partners capital accounts		558,803	573,232	1,133,283	1,162,796
Capital Members [Member] | Member's Redemptions [Member]
Partners capital accounts		(1,773,550)	(698,527)	(2,700,057)	(1,186,689)
Managers Capital Net [Member]
Beginning balance		192,288	144,394	181,774	133,268
Net income		11,787	11,331	22,301	22,457
Early withdrawal penalties		0
Ending balance		204,075	155,725	204,075	155,725
Unallocated Organization and Offering Expenses [Member]
Beginning balance		(1,758,812)	(2,165,927)	(1,858,282)	(2,260,068)
Organization and offering expenses allocated		76,656	80,194	154,221	160,909
Early withdrawal penalties		1,087	5,524	4,944	9,938
Ending balance		(1,645,876)	(2,068,360)	(1,645,876)	(2,068,360)
Unallocated Organization and Offering Expenses [Member] | RMC [Member]
Organization and offering expenses repaid by RMC		35,193	11,849	53,241	20,861
Members Capital, Net [Member]
Beginning balance		78,719,841	79,725,634	79,124,948	79,629,130
Net income		1,178,712	1,133,051	2,230,118	2,245,604
Early withdrawal penalties		1,087	5,524	4,944	9,938
Ending balance		77,601,483	79,634,995	77,601,483	79,634,995
Members Capital, Net [Member] | RMC [Member]
Organization and offering expenses repaid by RMC		35,193	11,849	53,241	20,861
Members Capital, Net [Member] | Earnings Distributed To Members [Member]
Partners capital accounts		(1,118,603)	(1,115,768)	(2,244,994)	(2,246,645)
Members Capital, Net [Member] | Earnings Distributed Used In DRIP [Member]
Partners capital accounts		558,803	573,232	1,133,283	1,162,796
Members Capital, Net [Member] | Member's Redemptions [Member]
Partners capital accounts		$ (1,773,550)	$ (698,527)	$ (2,700,057)	$ (1,186,689)

[1] The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

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Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Operations
Interest income received	$ 3,510,328	$ 2,937,891
Interest expense paid	(237,118)	(24,028)
Late fees and other loan income	113,709	13,002
Operations expense	(965,798)	(642,691)
Total cash provided by operations	2,421,121	2,284,174
Investing – loans
Loans funded	(18,380,800)	(21,975,850)
Principal collected	19,903,312	22,335,694
Loan transferred from related mortgage fund	(4,671,760)	(2,296,677)
Loans transferred to related mortgage funds	2,559,588
Loans sold to non-affiliate	2,988,268
Advances (made on) received from loans	(10,208)	1,434
Total cash provided by (used in) investing	2,388,400	(1,935,399)
Distributions to members
Distributions to members	(3,801,139)	(2,248,605)
Organization and offering expenses received, net	53,241	20,861
Formation loan collected	238,312
Cash used in members' capital	(3,509,586)	(2,227,744)
Advances	2,655,000	13,200,000
Repayments	(5,055,000)	(5,000,000)
Debt issuance costs		(109,526)
Cash (used in) provided by line of credit	(2,400,000)	8,090,474
Total cash (used in) provided by financing	(5,909,586)	5,862,730
Net (decrease) increase in cash	(1,100,065)	6,211,505
Cash, beginning of period	2,299,113	4,450,529
Cash, end of period	1,199,048	10,662,034
Net income	2,230,118	2,245,604
Adjustments to reconcile net income to net cash provided by operations
Charge off of accrued interest		(11,857)
Amortization of debt issuance costs	27,402	13,618
Provision for (recovery of) loan losses		(75)
Change in operating assets and liabilities
Loan payments in trust	80,944
Accrued interest	(22,499)	(47,161)
Prepaid interest	148,000	57,233
Receivable from related party	(56,387)	(12,235)
Accounts payable and accrued liabilities	3,902	27,630
Payable to related party	9,641	11,417
Total adjustments	191,003	38,570
Total cash provided by operations	2,421,121	2,284,174
Earnings Distributed To Members [Member]
Distributions to members
Distributions to members	(1,111,711)	(1,083,849)
Member's Redemptions [Member]
Distributions to members
Distributions to members	$ (2,689,428)	$ (1,164,756)

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Statements of Cash Flows (Parenthetical) (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Non cash financing activity in early withdrawal penalties	$ 10,627	$ 21,933
Non cash investing activity principal charges	0	20,068
Earnings Distributed To Members [Member]
Earnings distributed used in DRIP	1,133,283	1,162,796
Formation Loan [Member]
Non cash financing activity in early withdrawal penalties	5,683	11,995
Unallocated Organization and Offering Expenses [Member]
Non cash financing activity in early withdrawal penalties	$ 4,944	$ 9,938

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Organization and General

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Organization and General

NOTE 1 – ORGANIZATION AND GENERAL

Redwood Mortgage Investors IX, LLC (“RMI IX” or “the company”) is a Delaware limited liability company formed in October 2008 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily through first and second deeds of trust. The company is externally managed by Redwood Mortgage Corp (“RMC” or “the manager”). RMC provides the personnel and services necessary for the company to conduct its business as the company has no employees of its own. The mortgage loans the company funds and invests in are arranged and generally are serviced by RMC.

In the opinion of management of RMC, the accompanying unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial information included therein. These unaudited financial statements should be read in conjunction with the audited financial statements included in the company’s Form 10-K for the year ended December 31, 2020, filed with the U.S. Securities and Exchange Commission (SEC). The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the operating results to be expected for the full year.

The rights, duties and powers of the members and manager of the company are governed by the Ninth Amended and Restated Limited Liability Company Operating Agreement of RMI IX (the “Operating Agreement”), the Delaware Limited Liability Company Act and the California Revised Uniform Limited Liability Company Act.

Members representing a majority of the outstanding units may, without the concurrence of the managers, vote to: (i) dissolve the company, (ii) amend the Operating Agreement, subject to certain limitations, (iii) approve or disapprove the sale of all or substantially all of the assets of the company or (iv) remove or replace one or all of the managers. Where there is only one manager, a majority in interest of the members is required to elect a new manager to continue the company business after a manager ceases to be a manager due to its withdrawal.

The following is a summary of certain provisions of the Operating Agreement and is qualified in its entirety by the terms of the Operating Agreement. Members should refer to the Operating Agreement for complete disclosure of its provisions.

The manager is solely responsible for managing the business and affairs of the company, subject to the voting rights of the members on specified matters. The manager acting alone has the power and authority to act for and bind the company. RMC is entitled to one percent (1%) of the profits and losses of the company and to fees and reimbursements of qualifying costs as specified in the Operating Agreement. 

The company’s primary investment objectives are to:

• yield a favorable rate of return from the company’s business of making and/or investing in loans;

• preserve and protect the company’s capital by making and/or investing in loans secured by California real estate, preferably income-producing properties geographically situated in the San Francisco Bay Area and the coastal metropolitan regions of Southern California; and,

• generate and distribute cash flow from these mortgage lending and investing activities.

Net income (or loss) is allocated among the members according to their respective capital accounts after one percent (1%) of the net income (or loss) is allocated to the manager. The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Federal and state income taxes are the obligation of the members, other than the annual California franchise tax and the California LLC cash receipts taxes paid by the company.

The company’s net income, cash available for distribution, and net-distribution rate fluctuates depending on:

• loan origination volume and the balance of capital available to lend;

• the current and future interest rates negotiated with borrowers;

• line of credit advances, repayments and the interest rate thereon;

• loan sales to unaffiliated third parties, and any gains received thereon;

• the amount of fees and cost reimbursements to RMC;

• the timing and amount of other operating expenses, including expenses for professional services;

• the timing and amount of payments from RMC on the formation loan; and,

• fee and/or cost reimbursements waived, if any, from RMC.

The ongoing sources of funds for loans are the proceeds (net of redemption of members’ capital and operating expenses) from:

• loan payoffs;

• borrowers’ monthly principal and interest payments;

• line of credit advances;

• loan sales to unaffiliated third parties;

• payments from RMC on the outstanding balance of the formation loan; and

• sale of units to members participating in the dividend reinvestment plan.

The company intends to hold until maturity the loans in which it invests and does not presently intend to invest in mortgage loans primarily for the purpose of reselling such loans in the ordinary course of business; however, the company may sell mortgage loans (or fractional interests therein) when the manager determines that it appears to be advantageous for the company to do so, based upon then current interest rates, the length of time that the loan has been held by the company, the company’s credit risk and concentration risk and the overall investment objectives of the company. Loans sold to third parties may be sold for par, at a premium or, in the case of non-performing or under performing loans, at a discount. Company loans may be sold to third parties or to the manager or its related mortgage funds; however, any loan sold to the manager or a related mortgage fund will be sold for a purchase price equal to the greater of (i) the par value of the loan or (ii) the fair market value of the loan. The manager will not receive commissions or broker fees with respect to loan sales conducted for the company; however, selling loans will increase members’ capital available for investing in new loans for which the manager will earn brokerage fees and other forms of compensation.

COVID-19

Given the ongoing and dynamic nature of the impacts on peoples’ lives, the healthcare system and its resources, and the economy and real estate markets since the World Health Organization declared the COVID-19 outbreak a pandemic, it is not possible to predict or estimate the impact - for the remainder of 2021 and the years beyond - of the COVID-19 outbreak on the financial condition, the liquidity or the results of operations of the company. While the company has not incurred material disruptions to date, the rapid developments and fluidity of COVID-19 may cause the manager to continue to adjust its business operations, lending parameters, and collection practices and processes for past-due loans. The majority of borrowers have continued to make monthly payments and/or negotiated in good faith resulting in extensions on terms consistent with the original loan terms. No loan losses were incurred in the first six months of 2021 and none were incurred in 2020.

During 2020 and to a lesser extent in 2021, as a result of the disruptions caused by the pandemic, the company has experienced a manageable increase in requests for loan extensions, payment delinquencies and requests for forbearance agreements from borrowers. Market conditions, regulatory restrictions on our enforcement rights with respect to loans in default, delays in foreclosure proceedings, including moratoriums in some jurisdictions, and backlogs in the courts has increased the timeline to resolve non-performing and /or maturing loans.

During 2020, the “Coronavirus Aid, Relief, and Economic Security (“CARES”) Act” and the “Consolidated Appropriations Act (“CAA”) of 2020” were signed into law. The CARES Act includes various measures to provide relief to companies and the CAA extended some of the CARES Act programs along with adding new stimulus provisions. In March 2021, the American Rescue Plan Act of 2021 was also passed which further extended several CARES Act relief programs and other assistance. The manager has not taken and does not expect to take advantage of any measures under the CARES Act, the CAA or the American Rescue Plan Act. 

Distribution policy/Distribution reinvestment plan (DRIP)

Cash available for distribution at the end of each calendar month is allocated ninety-nine percent (99%) to the members and one percent (1%) to the manager. Cash available for distribution means cash flow from operations (excluding repayments for loan principal and other capital transaction proceeds) less amounts set aside for creation or restoration of reserves. The manager may withhold from cash otherwise distributable to the members with respect to any period the respective amounts of O&O expenses allocated to the members’ accounts for the applicable period pursuant to the company’s reimbursement to RMC and allocation to members’ accounts of O&O expenses. The amount otherwise distributable, less the respective amounts of O&O expenses allocated to members, is the net distribution. Per the terms of the company’s Operating Agreement, cash available for distribution to the members is allocated among the members in proportion to their percentage interests (except with respect to differences in the amounts of O&O expenses allocated to the respective members during the applicable period) and in proportion to the number of days during the applicable month that they owned such percentage interests.

See Note 3 (Manager and Other Related Parties) to the financial statements for a detailed discussion on the allocation of O&O expenses to members’ accounts.

Cash available for distributions allocable to members who have elected to receive distributions is disbursed at the end of each calendar month. The manager’s allocable share of cash available for distribution is also distributed not more frequently than cash distributions to members.

The distribution reinvestment plan (DRIP) provision of the Operating Agreement permits members to elect to have all or a portion of their monthly distributions reinvested in the purchase of additional units. Cash available for distributions allocable to members who have elected to participate in the DRIP is distributed and reinvested in units at each month end.

In May 2019, the company filed a Registration Statement on Form S-3 with the SEC (SEC File No. 333-231333) that went effective May 9, 2019, to offer up to 15,000,000 units ($15,000,000) to members of record as of April 30, 2019 who had previously elected to participate in the DRIP or who later provide written notice to the manager electing to participate in the DRIP, in those states in which approval has been obtained. As of June 30, 2021, the aggregate gross proceeds from sales of units to members under our DRIP pursuant to the May 2019 Form S-3 Registration Statement is approximately $5,051,000.

To determine the amount of cash to be distributed in any month, the company relies in part on its forecast of full-year net income, which takes into account the difference between the forecasted net income for the remainder of the year and actual results in the year to date and the requirement to maintain a cash reserve. As of June 30, 2021, the difference between earnings allocated to members’ capital accounts and net income available to members was approximately $139,000, and is expected to be offset by future earnings in excess of net distributions in 2021 as a result of borrower payments received including forgone interest on loans designated non-accrual.

Liquidity and unit redemption program

There are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units and none is expected to develop. In order to provide liquidity to members, the company’s Operating Agreement includes a unit redemption program, whereby beginning one year from the date of purchase of the units, a member may redeem all or part of their units, subject to certain limitations.

The price paid for redeemed units is based on the lesser of the purchase price paid by the redeeming member or the member’s capital account balance as of the date of each redemption payment. Redemption value – for other than DRIP units - is calculated based on the period from date of purchase as follows: after 2 years 94% of the purchase price or of the capital balance, whichever is less; after 3 years 96%; after four years 98%; and after five years 100%. 

The company redeems units quarterly, subject to certain limitations as provided for in the Operating Agreement. The maximum number of units which may be redeemed per quarter per individual member shall not exceed the greater of (i) 100,000 units, or (ii) 25% of the member’s total outstanding units. For redemption requests requiring more than one quarter to fully redeem, the percentage discount amount if any, that applies when the redemption payments begin continues to apply throughout the redemption period and applies to all units covered by such redemption request regardless of when the final redemption payment is made.

The company has not established a cash reserve from which to fund redemptions. The company’s capacity to redeem units upon request is limited by the availability of cash and the company’s cash flow. As provided in the Operating Agreement, the company will not, in any calendar year, redeem more than five percent (5%) of the weighted average number of units outstanding during the twelve-month period immediately prior to the date of the redemption. In the event unit withdrawal requests exceed 5% in any calendar year, units will be redeemed in the order of priority provided in the Operating Agreement.

Manager’s interest

If a manager is removed, withdrawn or terminated, the company will pay to the manager all amounts then accrued and due to the manager. Additionally, the company will terminate the manager’s interest in the company’s profits, losses, distributions and capital by payment of an amount in cash equal to the then-present fair value of such interest.

Term of the company

The term of the company will continue operations until 2028, unless sooner terminated as provided in the Operating Agreement, or extended by majority vote of the members.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).

Management estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate owned, at acquisition and subsequently. Actual results could differ materially from these estimates.

Fair value estimates

GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair values of assets and liabilities are determined based on the fair-value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable, or inputs derived from or corroborated by market data.

• Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the company’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the company’s own data.

The fair value of real property is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach.

These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, including the consideration of adjustments made for any attributes specific to the real property.

Management has the requisite familiarity with the real estate markets it lends in and of the specific properties lent on to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

Cash in banks

Certain of the company’s cash balances in banks exceed federally insured limits of $250,000. The bank or banks in which funds are deposited are reviewed periodically for their general creditworthiness/investment grade credit rating. See Note 5 (Line of Credit) for compensating balance arrangements.

Loans and interest income

Performing loans are carried at amortized cost which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the company’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. For performing loans, interest is accrued daily on the principal plus advances, if any.

Non-performing loans (i.e., loans with a payment in arears) less than 180 days delinquent continue to recognize interest income as long as the loan is in the process of collection and is considered to be well-secured. Non-performing loans are placed on non-accrual status if 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement. Late fees are recognized in the period received.

The company may fund a specific loan net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction to the principal.

In the normal course of the company’s operating activities, performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans.

From time to time, the manager negotiates and enters into loan modifications with borrowers whose loans are delinquent (non-performing). If a borrower is experiencing financial difficulties and a loan modification were to result in an economic concession to the borrower (i.e., a significant delay or reduction in cash flows compared to the original note), the modification is deemed a troubled debt restructuring (TDR).

In March 2020, various federal regulatory agencies issued an interagency statement on loan modifications and reporting for financial institutions working with borrowers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID- 19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

The company funds loans with the intent to hold the loans until maturity. From time to time the company may sell certain loans when the manager determines it to be in the best interest of the company. Loans are classified as held-for-sale once a decision has been made to sell loans and the loans held-for-sale have been identified. Loans classified as held for sale are carried at the lower of cost or fair value.   

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks.

Allowance for loan losses

Loans and the related accrued interest and advances (i.e., the loan balance) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the net realizable value (i.e., fair value less the cost to sell) of the collateral, net of any senior liens exceeds the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon.

If based upon current information and events, it is deemed probable the company will not collect substantially all amounts due according to the contractual terms of the original loan agreement, then a loan is designated as impaired. An insignificant delay or insignificant shortfall in the amount of payments does not constitute non-performance with the contractual terms of the original loan agreement if the manager expects to collect the amounts due including interest accrued at the contractual interest rate for the period of delay.  In determining the probability that the borrower will not substantially perform according to the terms of the original loan agreement, the manager considers the following:

• payment status – if payments are in arrears 90+ days (typically 3 payments past due) loans are designated impaired unless resolution of the delinquency is forthcoming without significant delay;

• bankruptcy – if the borrower files bankruptcy, the loan is designated impaired;

• notice of sale – if the company files a notice of sale, the loan is designated impaired.

Payments on loans designated as impaired are applied in the following order: late fees, accrued interest, advances, and lastly to principal.

For loans that are deemed collateral dependent for repayment, a provision for loan losses is recorded to adjust the allowance for loan losses (principal and/or recorded interest) in an amount such that the net carrying amount (unpaid principal plus recorded interest, less the specific allowance) is reduced to the lower of the loan balance or the estimated fair value of the related collateral, net of any costs to sell and net of any senior debt and claims.

The company charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. Any amounts collected after a charge off is deemed a recovery of loan losses. If the loan goes to foreclosure, an updated appraisal is ordered and the recorded investment in the loan is adjusted to the net realizable value of the REO to be acquired. The adjustment is made to the specific reserve in the allowance for loan losses by a charge or a credit to the provision for loan losses.

Real estate owned (REO)

Real estate owned, or REO, is property acquired in full or partial settlement of loan obligations generally through foreclosure and is recorded at acquisition at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expenses. Any recovery in the fair value subsequent to such a write down is recorded and is not to exceed the value recorded at acquisition. Recognition of gains or losses on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Debt issuance costs

Debt issuance costs are the fees and commissions incurred in the course of obtaining a line of credit for services from banks, law firms and other professionals and are amortized on a straight-line basis, which approximates the interest method, as interest expense over the term of the line of credit.

Recently issued accounting pronouncements

- Accounting and Financial reporting for Expected Credit Losses

The FASB issued an Accounting Standards Update (“ASU”) that significantly changes how entities will account for credit losses for most financial assets that are not measured at fair value through net income. The new standard will supersede currently in effect guidance and applies to all entities. Entities will be required to use a current expected credit loss (“CECL”) model to estimate credit impairment. This estimate will be forward-looking, meaning management will be required to use not only historical trends and current conditions, but must also consider forecasts about future economic conditions to determine the expected credit loss over the remaining life of an instrument. This will be a significant change from the current incurred credit loss model, and generally may result in allowances being recognized in earlier periods than under the current credit loss model. The ASU is effective for smaller reporting companies for interim and annual reporting periods in 2023.

RMI IX invests in real estate secured loans made with the expectation that the possibility of credit losses is remote as a result of substantial protective equity provided by the underlying collateral. The real estate secured programs and low loan-to-value ratios have caused the Company to expect that the adoption of the CECL model from the incurred loss models presently in use as to credit loss recognition will likely not materially impact the reported results of operations or financial position. However, the impact, if any, upon adoption will be dependent upon the facts and circumstances relating to the company’s loans at that date.

- Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides temporary optional expedients for various agreements and contracts that utilize the London Interbank Offered Rate (“LIBOR”) as the benchmark reference rate. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement

of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the potential discontinuance of LIBOR in relation to the company’s line of credit and has not yet adopted the optional relief.

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Manager and Other Related Parties

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Manager and Other Related Parties

NOTE 3 – MANAGER AND OTHER RELATED PARTIES

The Operating Agreement provides for compensation to the manager and for the reimbursement of qualifying costs as detailed below. RMC is entitled to 1% of the net income or loss of the company. RMC - at its sole discretion - collected less than the maximum allowable reimbursement of qualifying costs attributable to RMI IX (Costs from RMC on the Statements of Income), which increased the net income, cash available for distribution, and the net-distribution rate. The cost-reimbursement waivers in the three and six months ended June 30, 2021 and 2020, by RMC were not made for the purpose of providing RMI IX with sufficient funds to satisfy any required level of distributions, as the Operating Agreement has no such required level of distributions, nor to meet withdrawal requests.  

Mortgage servicing fees

The manager is entitled to receive a servicing fee of up to one-quarter of one percent (0.25%) annually of secured loan principal. The mortgage servicing fees are accrued monthly on all loans. Remittance to RMC is made monthly unless the loan has been assigned a specific loss reserve, at which point remittance is deferred until the specific loss reserve is no longer required, or the property securing the loan has been acquired by the company.

Asset management fees

The manager is entitled to receive a monthly asset management fee for managing RMI IX’s assets, liabilities, and operations in an amount up to three-quarters of one percent (0.75%) annually of the portion of the capital originally committed to investment in mortgages, not including leverage, and including up to two percent (2%) of working capital reserves.

Costs from RMC

The manager is entitled to request reimbursement for operations expense incurred on behalf of RMI IX, including without limitation, RMC’s personnel and non-personnel costs incurred for qualifying business activities, including investor services, accounting, tax and data processing, postage and out-of-pocket general and administration expenses. Qualifying personnel/compensation costs and consulting fees are tracked by business activity, and then costs of qualifying activities are allocated to RMI IX pro-rata based on the percentage of RMI IX’s members’ capital to the total capital of all related mortgage funds managed by RMC. Certain other non-personnel, qualifying costs such as postage and out-of-pocket general and administrative expenses can be tracked by RMC as specifically attributable to RMI IX; other non-personnel, qualifying costs (e.g., RMC’s accounting and audit fees, legal fees and expenses, occupancy, and insurance premiums) are allocated pro-rata based on the percentage of RMI’s members’ capital to total capital of the related mortgage funds managed by RMC. The amount of qualifying costs attributable to RMI IX incurred by RMC was $158,526 and $138,098 in the three months ended June 30, 2021 and 2020, respectively and $304,696 and $290,814 for the six months ended June 30, 2021 and 2020, respectively. The reimbursement of costs from RMC waived was $79,060 and $138,098 in the three months ended June 30, 2021 and 2020, respectively and $160,434 and $290,814 in the six months ended June 30, 2021 and 2020, respectively.

Loan administrative fees

The manager is entitled to receive a loan administrative fee of up to one percent (1%) of the principal amount of each new loan funded or acquired for services rendered in connection with the selection and underwriting of loans payable upon the closing or acquisition of each loan. Since August 2015, RMC, at its sole discretion, has waived loan administrative fees on new originations. The total amount of loan administrative fees chargeable was $121,900 and $156,023 in the three months ended June 30, 2021 and 2020, respectively and $183,808 and $219,759 in the six months ended June 30, 2021 and 2020, respectively.

Commissions and fees paid by the borrowers to RMC

- Brokerage commissions, loan originations

For fees in connection with the review, selection, evaluation and negotiation of loans (including extensions), RMC may collect a loan brokerage commission that is expected to range from approximately 1.5% to 5% of the principal amount of each loan made during the year. Total loan brokerage commissions are limited to an amount not to exceed 4% of the total company assets per year. The loan brokerage commissions are paid by the borrowers to RMC, and thus are not an expense of the company. Loan brokerage commissions paid by the borrowers to RMC approximated $266,000 and $345,000 for three months ended June 30, 2021 and 2020, respectively and $427,000 and $503,000 for the six months ended June 30, 2021 and 2020, respectively.  

- Other fees

RMC receives fees for processing, notary, document preparation, credit investigation, reconveyance and other mortgage related fees. The amounts received are customary for comparable services in the geographical area where the property securing the loan is located, payable solely by the borrower and not by the company.

Formation loan

Commissions for unit sales to new members paid to broker-dealers (“B/D sales commissions”) and premiums paid to certain investors upon the purchase of units were paid by RMC and were not paid directly by RMI IX out of unit-sales proceeds. Instead, RMI IX advanced to RMC amounts sufficient to pay the B/D sales commissions and premiums to be paid to investors. Such advances in total were not to exceed seven percent (7%) of offering proceeds. The receivable arising from the advances is unsecured and non-interest bearing and is referred to as the “formation loan.” When offerings of units to new members ended on April 30, 2019, such advances totaled $5,626,566, of which $3,568,024 remains outstanding at June 30, 2021. 

Formation loan transactions for the six months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Balance, January 1	$	3,812,019		$	3,948,064
Payments received from RMC		(238,312	)		—
Early withdrawal penalties applied		(5,683	)		(11,995	)
Balance, June 30	$	3,568,024		$	3,936,069

RMC is repaying the formation loan such that the formation loan is paid by December 31, 2027, and prior to the end of the term of the company in 2028. Beginning December 31, 2020, RMC will make quarterly payments of principal, without interest, of approximately $124,000, less early withdrawal penalties until such time – in the opinion of the manager -as the market uncertainties resulting from the COVID-19 pandemic are substantially resolved and loan brokerage commissions earned by the manager on new loan originations return to pre-pandemic levels. Annual payments of $496,000 are expected to resume by December 2022. The primary source of repayment of the formation loan are the loan brokerage commissions earned by RMC. The formation loan is forgiven if the manager is removed and RMC is no longer receiving payments for services rendered.  

Redemptions of members’ capital

Redemptions of members’ capital for the three and six months ended June 30, 2021 and 2020 are presented in the following table.

	Three months ended				Six months ended
Redemptions	2021		2020		2021		2020
Without penalty	$	1,682,981	$	444,922	$	2,432,327	$	762,594
With penalty		90,569		253,605		267,730		424,095
Total	$	1,773,550	$	698,527	$	2,700,057	$	1,186,689
Early withdrawal penalties	$	2,311	$	12,200	$	10,627	$	21,933

At June 30, 2021, scheduled redemptions of members' capital were $1,205,307, of which $944,301 is payable in 2021, and $261,006 is payable in 2022. Scheduled redemptions of $141,008 are subject to early withdrawal penalties.

Organization and offering expenses

The manager was reimbursed for O&O expenses incurred in connection with the organization of the company and the offering of the units of membership interest including, without limitation, attorneys’ fees, accounting fees, printing costs and other selling expenses (other than sales commissions) in a total amount not exceeding 4.5% of the original purchase price of all units (other than DRIP units) sold in all offerings (hereafter, the “maximum O&O expenses”). RMC paid the O&O expenses in excess of the maximum O&O expenses.

The O&O expenses incurred by RMI IX are allocated to the members as follows - For each of forty (40) calendar quarters or portion thereof after December 31, 2015 that a member holds units (other than DRIP units), the O&O expenses incurred by RMI IX are allocated to and debited from that member’s capital account in an annual amount equal to 0.45% of the member’s original purchase price for those units, in equal quarterly installments of 0.1125% each commencing with the later of the first calendar quarter of 2016 or the first full calendar quarter after a member’s purchase of units, and continuing through the quarter in which such units are redeemed.

Unallocated O&O transactions for the six months ended June 30, 2021 and 2020 are summarized in the following table.

	2021			2020
Balance, January 1	$	1,858,282		$	2,260,068
O&O expenses allocated		(154,221	)		(160,909	)
O&O expenses paid by RMC(1)		(53,241	)		(20,861	)
Early withdrawal penalties applied (2)		(4,944	)		(9,938	)
Balance, June 30	$	1,645,876		$	2,068,360

(1) RMC is obligated per the Operating Agreement to repay RMI IX for the amount of unallocated O&O expenses attributed to a member’s capital account if the member redeems prior to the 40 quarterly allocations. RMC estimated its future obligation to repay unallocated O&O expenses on scheduled redemptions as of June 30, 2021, to be approximately $13,600, which may be offset in part by early withdrawal penalties collected in future periods.

(2) The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

Other related party transactions

- Payable to/receivable from related parties

From time to time, in the normal course of business operations, the company may have payables to and/or receivables from related parties. At June 30, 2021, the receivable from a related party balance of $56,387 consisted primarily of accounts receivable from RMC related to O&O expenses, and the payable to related party balance of $13,826 consisted of accounts payable to a related mortgage fund. At December 31, 2020, the payable to related parties balance consisted of accounts payable and cost reimbursements to the manager and related mortgage fund of $6,452, which was partially offset by a receivable of $2,267 due from the manager and related mortgage fund. The receivable was received from the manager and the payable was paid to the manager in March 2021.

- Loan transactions with related parties

In the ordinary course of business, performing loans may be transferred by executed assignment, in-part or in-full, between the RMC managed mortgage funds at par which approximates market value. In the six months ended June 30, 2021, a related mortgage fund transferred to RMI IX five performing loans with aggregate principal of $4,671,760 in-full at par value, which approximates fair value. In the six months ended June 30, 2020 a related mortgage fund transferred to RMI IX one performing loan with principal of $2,296,677 in-full at par value which approximates fair value. RMI IX paid cash for the loans and the related mortgage fund has no continuing obligation or involvement with the loans.

In the six months ended June 30, 2021, RMI IX transferred to related mortgage fund(s) five performing loans with aggregate principal of $2,559,588 in-full at par value, which approximates fair value. The related mortgage fund(s) paid cash for the loans and RMI IX has no continuing obligation or involvement with the loans. No loans were transferred to related mortgage funds in the six months ended June 30, 2020.

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Loans

6 Months Ended

Jun. 30, 2021

Receivables [Abstract]

Loans

NOTE 4 – LOANS

Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination and are purchased at par value, which approximates fair value. See Note 3 (Manager and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds. 

As of June 30, 2021, 53 loans outstanding (representing 97% of the aggregate principal of the company’s loan portfolio) have a loan term of five years or less. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty provision.

As of June 30, 2021, 29 loans outstanding (representing 28% of the aggregate principal of the company’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization, with the remaining principal due at maturity. The remaining loans provide for monthly payments of interest only, with the principal due at maturity.

Secured loans unpaid principal balance (principal)

Secured loan transactions for the three and six months ended June 30, 2021 are summarized in the following table.

	Three months ended			Six months ended
Principal, beginning of period	$	83,364,317		$	82,274,807
Loans funded		12,190,000			18,380,800
Principal collected		(12,588,867	)		(19,903,312	)
Loans transferred from related mortgage fund		—			4,671,760
Loans transferred to related mortgage funds		(1,691,251	)		(2,559,588	)
Loans sold to non-affiliate		(1,398,000	)		(2,988,268	)
Principal, June 30	$	79,876,199		$	79,876,199

During the three and six months ended June 30, 2021, the company renewed eight and twelve maturing (or matured) loans with aggregated principal of approximately $10,107,000 and $13,498,000, respectively, which are not included in the activity shown in the table above. The loans were current and deemed well collateralized (i.e., the LTV for the collateral was within lending guidelines) at the time they were extended.

The company funds loans with the intent to hold the loans until maturity, although from time to time the company may sell certain loans when the manager determines it to be in the best interest of the company.

During the three and six months ended June 30, 2021, two and five loans with aggregate principal of approximately $1,398,000 and $2,988,000, respectively were sold to unaffiliated third parties, for an amount that approximated the loan balance at the time of sale.   

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks. Loan payments in trust at June 30, 2021, were disbursed to the company’s account by July 19, 2021. Loan payments in trust at December 31, 2020 were disbursed to the company’s account by January 15, 2021.  

Loan characteristics

Secured loans had the characteristics presented in the following table.

	June 30,			December 31,
	2021			2020
Number of secured loans		59			82
Secured loans – principal	$	79,876,199		$	82,274,807
Secured loans – lowest interest rate (fixed)		6.8	%		6.8	%
Secured loans – highest interest rate (fixed)		10.5	%		10.5	%
Average secured loan – principal	$	1,353,834		$	1,003,351
Average principal as percent of total principal		1.7	%		1.2	%
Average principal as percent of members’ capital, net		1.7	%		1.3	%
Average principal as percent of total assets		1.7	%		1.2	%
Largest secured loan – principal	$	6,735,000		$	6,735,000
Largest principal as percent of total principal		8.4	%		8.2	%
Largest principal as percent of members’ capital, net		8.7	%		8.5	%
Largest principal as percent of total assets		8.2	%		7.9	%
Smallest secured loan – principal	$	62,795		$	104,378
Smallest principal as percent of total principal		0.1	%		0.1	%
Smallest principal as percent of members’ capital, net		0.1	%		0.1	%
Smallest principal as percent of total assets		0.1	%		0.1	%
Number of California counties where security is located		12			14
Largest percentage of principal in one California county		32.4	%		28.2	%
Number of secured loans with prepaid interest		2			—
Prepaid interest	$	148,000		$	—

At June 30, 2021, the company’s largest loan with principal of $6,735,000 is secured by an office building located in Santa Clara County, bears an interest rate of 8.25% and matures on October 1, 2021. As of June 30, 2021, the company had no commitments to lend outstanding and had no construction or rehabilitation loans outstanding.   

Lien position

At funding, secured loans had the lien positions presented in the following table.

	June 30, 2021								December 31, 2020
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		41	$	67,320,452			84	%		56	$	61,066,097			74	%
Second trust deeds		18		12,555,747			16			26		21,208,710			26
Total principal, secured loans		59		79,876,199			100	%		82		82,274,807			100	%
Liens due other lenders at loan closing				35,215,207								45,206,740
Total debt			$	115,091,406							$	127,481,547
Appraised property value at loan closing			$	220,635,000							$	251,970,000
Percent of total debt to appraised values    (LTV) at loan closing(1)				55.7	%							55.6	%

(1) Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing nor does it include decreases or increases on senior liens to other lenders.

Property type

Secured loans summarized by property type are presented in the following table.

	June 30, 2021							December 31, 2020
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(2)		29	$	29,138,849		37	%		47	$	30,297,525		37	%
Commercial		24		46,561,191		58			27		43,692,125		53
Multi-family		5		2,676,159		3			8		8,285,157		10
Land		1		1,500,000		2			—		—		—
Total principal, secured loans		59	$	79,876,199		100	%		82	$	82,274,807		100	%

(2) Single family property type as of June 30, 2021 consists of 8 loans with principal of $9,240,711 that are owner occupied and 21 loans with principal of $19,898,138 that are non-owner occupied. At December 31, 2020, single family property type consisted of 8 loans with principal of $5,565,052 that are owner occupied and 39 loans with principal of $24,732,473 that are non-owner occupied.

Distribution of loans within California

The distribution of secured loans within California by counties is presented in the following table.

	June 30, 2021					December 31, 2020
	Principal		Percent			Principal		Percent
San Francisco Bay Area(3)
Santa Clara	$	25,896,645		32.4	%	$	23,205,654		28.2	%
San Francisco		14,100,411		17.6			11,339,546		13.8
San Mateo		5,646,542		7.1			6,878,086		8.4
Alameda		3,403,137		4.3			6,790,814		8.2
Contra Costa		5,143,834		6.4			1,094,189		1.3
Marin		—		—			1,944,696		2.4
		54,190,569		67.8			51,252,985		62.3
Other Northern California
Placer		1,500,000		1.9			—		0.0
Monterey		—		0.0			1,110,000		1.4
Tehama		404,831		0.5			404,837		0.5
Sacramento		70,729		0.1			104,378		0.1
		1,975,560		2.5			1,619,215		2.0
Northern California Total		56,166,129		70.3			52,872,200		64.3
Los Angeles & Coastal
Los Angeles		7,734,845		9.7			11,775,334		14.3
San Diego		5,787,128		7.2			10,186,152		12.4
Orange		8,469,097		10.6			5,431,677		6.6
Santa Barbara		—		—			290,444		0.3
		21,991,070		27.5			27,683,607		33.6
Other Southern California
San Bernardino		1,719,000		2.2			1,719,000		2.1
Southern California Total		23,710,070		29.7			29,402,607		35.7
Total principal, secured loans	$	79,876,199		100.0	%	$	82,274,807		100.0	%

(3) Includes Silicon Valley

Scheduled maturities

Secured loans scheduled to mature as of June 30, 2021, are presented in the following table.

	Loans		Principal		Percent
2021(4)		17	$	21,585,614		27	%
2022		23		27,199,427		34
2023		8		15,655,754		20
2024		2		3,939,766		5
2025		5		3,745,861		5
Thereafter		1		239,682		—
Total scheduled maturities		56		72,366,104		91
Matured as of June 30, 2021		3		7,510,095		9
Total principal, secured loans		59	$	79,876,199		100	%

(4) Loans scheduled to mature in 2021 after June 30. Includes one loan for which the company entered into a forbearance agreement with the borrower in February 2021 which deferred the maturity date until July 2021. The loan had principal of approximately $1,200,000, which matured December 1, 2020.

Scheduled maturities are presented based on the most recent in-effect agreement with the borrower, including forbearance agreements. As a result, matured loans at June 30, 2021, for the scheduled maturities table may differ from the same captions in the tables of delinquencies and payment in arears that are based on the loan terms and do not consider forbearance agreements. For matured loans, the company may continue to accept payments while pursuing collection of principal or while negotiating an extension of the loan’s maturity date.

It is the company’s experience that the timing of future cash receipts from secured loans will differ from scheduled maturities.  Loans may be repaid or renewed before, at or after the contractual maturity date.

Delinquency/Non-performing secured loans

Secured loans summarized by payment-delinquency status are presented in the following table.

	June 30, 2021				December 31, 2020
	Loans		Principal		Loans		Principal
Current		50	$	67,262,102		73	$	74,041,631
Past Due
30-89 days		4		7,698,356		1		190,195
90-179 days		3		1,766,254		5		4,756,811
180 or more days		2		3,149,487		3		3,286,170
Total past due		9		12,614,097		9		8,233,176
Total principal, secured loans		59	$	79,876,199		82	$	82,274,807

At June 30, 2021 and December 31, 2020, there were two forbearance agreements in effect. One with principal of $990,000 is included in the table above as 90-179 days past due, and one with a principal of $1,200,000 which is included in the table above as 180 or more days past due.

During the six months ended June 30, 2021 the company modified an existing forbearance agreement for a loan included in the table above as 90-179 days past due with principal of $990,000, and a maturity date of December 1, 2025, that renews and follows on a forbearance agreement of October 2020. The loan was designated impaired at December 31, 2020. The 2020 forbearance agreement which expired on February 1, 2021, was renewed effective March 2021, and permits partial monthly payments through July 2021. Deferred interest due for missed and partial payments is added to the balloon payment due at maturity. As of June 30, 2021, the loan was designated impaired.  

No loan forbearance agreements or payment modifications were made during the six months ended June 30, 2021, and none were in effect at December 31, 2020, that would be deemed troubled debt restructurings.  

At June 30, 2021, and December 31, 2020, the company had one workout agreement with a borrower. The loan, with principal of $190,198 matured on June 1, 2016. The workout agreement was entered into September 2016, whereby the borrower agreed to resume monthly payments. This agreement extended the maturity date through October 1, 2021. As of June 30, 2021, the loan was 90 days delinquent and was designated as impaired and in non-accrual status.

Non-performing secured loans at June 30, 2021, and December 31, 2020, had principal payments in arrears totaling $8,713,190 (9 loans) and $1,577,874 (8 loans), respectively and interest payments in arrears totaling $470,041 and $360,813, respectively. Payments in arrears for non-performing secured loans (i.e., monthly interest and principal payments past due 30 or more days) at June 30, 2021 and December 31, 2020, are presented in the following tables.

	Loans				Principal				Interest(5)
At June 30, 2021	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days    (1-3 payments)		3		1	$	7,510,095	$	789	$	37,813	$	2,987	$	7,551,684
90-179 days    (4-6 payments)		—		3		—		2,251		—		60,606		62,857
180 or more days    (more than 6    payments)		1		1		1,200,000		55		168,000		200,635		1,568,690
Total past due(6)		4		5	$	8,710,095	$	3,095	$	205,813	$	264,228	$	9,183,231

(5) Interest includes foregone interest of approximately $94,500 on non-accrual loans past maturity and approximately $112,500 for monthly payments in arrears. June 2021 interest is due July 1, 2021 and is not included in the payments in arrears at June 30, 2021.

(6) In July 2021, three loans with aggregate principal of $7,510,095 included in the table above as 30-89 days past maturity, paid in full including interest in arrears of $37,813.

	Loans				Principal				Interest(7)
At December 31, 2020	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days    (1-3 payments)		—		1	$	—	$	378	$	—	$	1,509	$	1,887
90-179 days    (4-6 payments)		1		4		376,613		854		—		146,270		523,737
180 or more days    (more than 6    payments)		1		1		1,200,000		29		105,000		108,034		1,413,063
Total past due(8)		2		6	$	1,576,613	$	1,261	$	105,000	$	255,813	$	1,938,687

(7) Interest includes foregone interest of $42,000 on non-accrual loans past maturity and approximately $20,800 for monthly payments in arrears.  December 2020 interest is due January 1, 2021 and is not included in the payments in arrears at December 31, 2020.

(8) One loan with principal of approximately $137,000, which was 180 or more days past due, paid in full in January 2021 and so was not designated as non-performing at December 31, 2020, and is not included in the table above.

Delinquency/Loans in non-accrual status

Secured loans in non-accrual status are summarized in the following table.

	June 30, 2021		December 31, 2020
Number of loans		4		3
Principal	$	4,329,684	$	3,339,684
Advances		20,941		10,320
Accrued interest		214,348		181,060
Total recorded investment	$	4,564,973	$	3,531,064
Foregone interest	$	239,583	$	62,821

Non-performing loans are placed on non-accrual status if 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only (i.e., foregone interest in the table above); however, previously recorded interest is not reversed.

At June 30, 2021, there was one loan with principal of approximately $586,000 which was 90 or more days past due and not in non-accrual status.

At December 31, 2020, five loans with aggregate principal of $4,703,296 were 90 days or more days past due and were not in non-accrual status.

Provision/allowance for loan losses and impaired loans

Generally, the company has not recorded an allowance for loan losses as all loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. From time to time, the manager may deem it in the best interest of the company to agree to concessions to borrowers to facilitate a sale of collateral or refinance transactions primarily for secured loans in second lien position.

Activity in the allowance for loan losses for the six months ended June 30, 2021 and 2020, is presented in the following table.

	2021		2020
Balance January 1,	$	55,000	$	87,000
Recovery for loan losses		—		(75	)
Charge-offs		—		(31,925	)
Balance June 30,	$	55,000	$	55,000

Loans designated impaired and any associated allowance for loan losses is presented in the following table.

	June 30, 2021			December 31, 2020
Number of loans		5			6
Principal	$	4,915,741		$	7,529,684
Recorded investment(9)		5,167,636			7,895,605
Impaired loans without allowance		5,167,636			7,895,605
Impaired loans with allowance		—			—
Allowance for loan losses, impaired loans		—			—
Weighted average LTV at origination		60.2	%		52.5	%

(9) Recorded investment is the sum of the principal, advances, and accrued interest receivable for financial reporting purposes.

Loans designated impaired had an average recorded investment, interest income recognized and interest income received in cash for the six months ended June 30, 2021 and the year ended December 31, 2020, as presented in the following table.

	June 30, 2021		December 31, 2020
Average recorded investment	$	6,531,621	$	6,307,655
Interest income recognized		48,186		704,506
Interest income received in cash		40,842		360,753

Fair Value

The following methods and assumptions are used when estimating fair value of secured loans.

Secured loans, performing and non-performing not designated as impaired (Level 3) - Each loan is reviewed quarterly for its delinquency, LTV adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors. Due to the nature of the company’s loans and borrowers, the fair value of loan balances secured by deeds of trust approximates the recorded amount (per the financial statements) due to the following:

• are of shorter terms at origination than commercial real estate loans by institutional lenders and conventional single-family home mortgage lenders;

• are written without a prepayment penalty causing uncertainty/a lack of predictability as to the expected duration of the loan; and

• have limited marketability and are not yet sellable into an established secondary market.

Secured loans, designated impaired (Level 3) - The fair value of secured loans designated impaired is the lesser of the fair value of the collateral or the enforceable amount of the note. Secured loans designated impaired are collateral dependent because it is expected that the primary source of repayment will not be from the borrower but rather from the collateral. The fair value of the collateral is determined on a nonrecurring basis by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions (Level 3 inputs). When the fair value of the collateral exceeds the enforceable amount of the note, the borrower is likely to redeem the note. Accordingly, third party market participants would generally pay the fair value of the collateral, but no more than the enforceable amount of the note.

The following methods and assumptions are used to determine the fair value of the collateral securing a loan.

Single family - Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison method. Management primarily obtains sale comps via its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed and adjusted for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built.

If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals.

Multi-family residential - Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in multi-family residential properties. Sales comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units by the number of bedrooms and bathrooms, square footage, condition, amenities and year built.

Management’s secondary method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method.  In order to determine market cap rates for properties of the same class and location as the subject, management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing project. When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial - Management’s preferred method for determining the fair value of its commercial buildings is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in commercial properties. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units, common areas, and year built.

Management’s secondary method for valuing its commercial buildings is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project.

When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial land - Commercial land has many variations/uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land, including a determination of its highest and best use. Management may rely on information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal.

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Line of Credit

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Line of Credit

NOTE 5 – LINE OF CREDIT

In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. Activity involving the line of credit during the six months ended June 30, 2021 and 2020 is presented in the following table.

	2021			2020
Balance, January 1,	$	10,000,000		$	—
Draws		2,655,000			13,200,000
Repayments		(5,055,000	)		(5,000,000	)
Balance, June 30,	$	7,600,000		$	8,200,000
Line of credit - average daily balance	$	9,240,000		$	2,621,000

The company can borrow up to a maximum principal of $10 million subject to a borrowing base calculation pursuant to a credit and term loan agreement (the loan agreement) with a bank. Amounts under the loan agreement are secured by a first priority security interest in the notes and deeds of trust of the pledged loans in the borrowing base. The loan agreement matures in March 2022 when all amounts outstanding are then due. The company has the option at the maturity date to convert the then outstanding principal balance on the line of credit to a one-year term loan - for a fee of one-quarter of one percent (0.25%) – thereby extending the maturity date to March 2023.

Interest on the outstanding principal is payable monthly and accrues at the per annum rate of the greater of (i) five percent (5%) or (ii) the sum of the one-month LIBOR rate plus three and one-quarter percent (3.25%). If the company does not maintain the required compensating balance with a minimum daily average of $1.0 million for the calendar quarter, the interest rate automatically increases by one-quarter of one percent (0.25%) above that rate which would otherwise be applicable for the next calendar quarter retroactive to the beginning of the calendar quarter in which the compensating balance is not maintained. At June 30, 2021, the interest rate was five percent (5%).

For each calendar quarter during which the aggregate average daily outstanding principal is less than fifty percent (50%) of the maximum principal of $10 million, there is a quarterly unused line fee equal to one-half of one percent (0.50%) per annum of the average daily difference between the average principal outstanding and fifty percent (50%) of the maximum principal of $10 million ($5,000,000).

The loan proceeds are to be used exclusively to fund secured loans. The loan agreement provides for customary financial and borrowing base reporting by the company to the lending bank and specifies that the company shall maintain (i) minimum tangible net worth of $50 million, net of amounts due from related companies; (ii) debt service coverage ratio at all times of not less than 2.00 to 1.00; and (iii) loan payment delinquency of less than ten percent (10.0%) at calendar quarter-end, calculated as the principal of loans with payments over 61-days past due as determined by the lending bank’s guidance, less loan loss allowances, divided by total principal of the company’s loans. The loan agreement provides that in the event the loan payment delinquency rate exceeds 10.0% as of the end of any quarter, the bank will cease to make any further advances but agrees not to accelerate repayment of the loan.

At June 30, 2021 and December 31, 2020, aggregate principal of pledged loans was approximately $17,835,000 and $20,068,000, respectively with a maximum allowed advance thereon of approximately $10,000,000, subject to the borrowing base calculation.

Debt issuance costs of approximately $110,000 are being amortized over the two-year term of the line of credit agreement. Amortized debt issuance costs included in interest expense approximated $13,700 and $13,600 for the three months ended June 30, 2021 and 2020, and $27,400 and $13,600 for the six months ended June 30, 2021 and 2020 respectively.

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Commitments and Contingencies, Other Than Loan Commitments

6 Months Ended

Jun. 30, 2021

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies, Other Than Loan Commitments

NOTE 6 – COMMITMENTS AND CONTINGENCIES, OTHER THAN LOAN COMMITMENTS

Commitments

Note 3 (Manager and Other Related Parties) presents a detailed discussion of the company’s contractual obligations to RMC and scheduled redemptions of members’ capital at June 30, 2021.

Legal proceedings

As of June 30, 2021, the company is not involved in any legal proceedings other than those that would be considered part of the normal course of business. In the normal course of its business, the company may become involved in legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect the debt owed under the promissory notes, to enforce the provisions of the deeds of trust, to protect its interest in the real property subject to the deeds of trust and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions, in and of themselves, typically would be of any material financial impact to the net income or balance sheet of the company.

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Subsequent Events

6 Months Ended

Jun. 30, 2021

Subsequent Events [Abstract]

Subsequent Events

NOTE 7 – SUBSEQUENT EVENTS

The manager evaluated events occurring subsequent to June 30, 2021 and determined that there were no events or transactions occurring during this reporting period that require recognition or disclosure in the unaudited financial statements.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2021

Accounting Policies [Abstract]

Basis of Presentation

Basis of presentation

The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).

Management Estimates

Management estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements and the reported amounts of revenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for loan losses, including, when applicable, the valuation of impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate owned, at acquisition and subsequently. Actual results could differ materially from these estimates.

Fair Value Estimates

Fair value estimates

GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

Fair values of assets and liabilities are determined based on the fair-value hierarchy established in GAAP. The hierarchy is comprised of three levels of inputs to be used:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the company has the ability to access at the measurement date. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

• Level 2 inputs are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly in active markets and quoted prices for identical assets or liabilities that are not active, and inputs other than quoted prices that are observable, or inputs derived from or corroborated by market data.

• Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs reflect the company’s own assumptions about the assumptions market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs are developed based on the best information available in the circumstances and may include the company’s own data.

The fair value of real property is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach.

These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, including the consideration of adjustments made for any attributes specific to the real property.

Management has the requisite familiarity with the real estate markets it lends in and of the specific properties lent on to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

Cash in Banks

Cash in banks

Certain of the company’s cash balances in banks exceed federally insured limits of $250,000. The bank or banks in which funds are deposited are reviewed periodically for their general creditworthiness/investment grade credit rating. See Note 5 (Line of Credit) for compensating balance arrangements.

Loans and Interest Income

Loans and interest income

Performing loans are carried at amortized cost which is generally equal to the unpaid principal balance (principal). Management has discretion to pay amounts (advances) to third parties on behalf of borrowers to protect the company’s interest in the loan. Advances include, but are not limited to, the payment of interest and principal on a senior lien to prevent foreclosure by the senior lien holder, property taxes, insurance premiums and attorney fees. Advances generally are stated at the amounts paid out on the borrower’s behalf and any accrued interest on amounts paid out, until repaid by the borrower. For performing loans, interest is accrued daily on the principal plus advances, if any.

Non-performing loans (i.e., loans with a payment in arears) less than 180 days delinquent continue to recognize interest income as long as the loan is in the process of collection and is considered to be well-secured. Non-performing loans are placed on non-accrual status if 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only; however, previously recorded interest is not reversed. A loan may return to accrual status when all delinquent interest and principal payments become current in accordance with the terms of the loan agreement. Late fees are recognized in the period received.

The company may fund a specific loan net of an interest reserve (one to two years) to insure timely interest payments at the inception of the loan. Any interest reserve is amortized over the period that the amount is prepaid. In the event of an early loan payoff, any unapplied interest reserves would be first applied to any accrued but unpaid interest and then as a reduction to the principal.

In the normal course of the company’s operating activities, performing loans that are maturing or have matured may be renewed at then current market rates of interest and terms for new loans.

From time to time, the manager negotiates and enters into loan modifications with borrowers whose loans are delinquent (non-performing). If a borrower is experiencing financial difficulties and a loan modification were to result in an economic concession to the borrower (i.e., a significant delay or reduction in cash flows compared to the original note), the modification is deemed a troubled debt restructuring (TDR).

In March 2020, various federal regulatory agencies issued an interagency statement on loan modifications and reporting for financial institutions working with borrowers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the Financial Accounting Standards Board (FASB) that short-term modifications made on a good faith basis in response to COVID- 19 to borrowers who were current prior to any relief, are not to be considered TDRs. This includes short-term (e.g., six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant.

The company funds loans with the intent to hold the loans until maturity. From time to time the company may sell certain loans when the manager determines it to be in the best interest of the company. Loans are classified as held-for-sale once a decision has been made to sell loans and the loans held-for-sale have been identified. Loans classified as held for sale are carried at the lower of cost or fair value.   

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks.

Allowance for Loan Losses

Allowance for loan losses

Loans and the related accrued interest and advances (i.e., the loan balance) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the net realizable value (i.e., fair value less the cost to sell) of the collateral, net of any senior liens exceeds the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon.

If based upon current information and events, it is deemed probable the company will not collect substantially all amounts due according to the contractual terms of the original loan agreement, then a loan is designated as impaired. An insignificant delay or insignificant shortfall in the amount of payments does not constitute non-performance with the contractual terms of the original loan agreement if the manager expects to collect the amounts due including interest accrued at the contractual interest rate for the period of delay.  In determining the probability that the borrower will not substantially perform according to the terms of the original loan agreement, the manager considers the following:

• payment status – if payments are in arrears 90+ days (typically 3 payments past due) loans are designated impaired unless resolution of the delinquency is forthcoming without significant delay;

• bankruptcy – if the borrower files bankruptcy, the loan is designated impaired;

• notice of sale – if the company files a notice of sale, the loan is designated impaired.

Payments on loans designated as impaired are applied in the following order: late fees, accrued interest, advances, and lastly to principal.

For loans that are deemed collateral dependent for repayment, a provision for loan losses is recorded to adjust the allowance for loan losses (principal and/or recorded interest) in an amount such that the net carrying amount (unpaid principal plus recorded interest, less the specific allowance) is reduced to the lower of the loan balance or the estimated fair value of the related collateral, net of any costs to sell and net of any senior debt and claims.

The company charges off uncollectible loans and related receivables directly to the allowance account once it is determined the full amount is not collectible. Any amounts collected after a charge off is deemed a recovery of loan losses. If the loan goes to foreclosure, an updated appraisal is ordered and the recorded investment in the loan is adjusted to the net realizable value of the REO to be acquired. The adjustment is made to the specific reserve in the allowance for loan losses by a charge or a credit to the provision for loan losses.

Real Estate Owned (REO)

Real estate owned (REO)

Real estate owned, or REO, is property acquired in full or partial settlement of loan obligations generally through foreclosure and is recorded at acquisition at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. The fair value estimates are derived from information available in the real estate markets including similar property, and often require the experience and judgment of third parties such as commercial real estate appraisers and brokers. The estimates figure materially in calculating the value of the property at acquisition, the level of charge to the allowance for loan losses and any subsequent valuation reserves. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expenses. Any recovery in the fair value subsequent to such a write down is recorded and is not to exceed the value recorded at acquisition. Recognition of gains or losses on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Debt Issuance Costs

Debt issuance costs

Debt issuance costs are the fees and commissions incurred in the course of obtaining a line of credit for services from banks, law firms and other professionals and are amortized on a straight-line basis, which approximates the interest method, as interest expense over the term of the line of credit.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements

- Accounting and Financial reporting for Expected Credit Losses

The FASB issued an Accounting Standards Update (“ASU”) that significantly changes how entities will account for credit losses for most financial assets that are not measured at fair value through net income. The new standard will supersede currently in effect guidance and applies to all entities. Entities will be required to use a current expected credit loss (“CECL”) model to estimate credit impairment. This estimate will be forward-looking, meaning management will be required to use not only historical trends and current conditions, but must also consider forecasts about future economic conditions to determine the expected credit loss over the remaining life of an instrument. This will be a significant change from the current incurred credit loss model, and generally may result in allowances being recognized in earlier periods than under the current credit loss model. The ASU is effective for smaller reporting companies for interim and annual reporting periods in 2023.

RMI IX invests in real estate secured loans made with the expectation that the possibility of credit losses is remote as a result of substantial protective equity provided by the underlying collateral. The real estate secured programs and low loan-to-value ratios have caused the Company to expect that the adoption of the CECL model from the incurred loss models presently in use as to credit loss recognition will likely not materially impact the reported results of operations or financial position. However, the impact, if any, upon adoption will be dependent upon the facts and circumstances relating to the company’s loans at that date.

- Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, provides temporary optional expedients for various agreements and contracts that utilize the London Interbank Offered Rate (“LIBOR”) as the benchmark reference rate. The relief generally applies to eligible modifications of contractual terms that change (or have the potential to change) the amount or timing of contractual cash flows related to replacement

of a reference rate. The relief allows such modifications to be accounted for as continuations of existing contracts without additional analysis. As the guidance in ASU 2020-04 is intended to assist entities during the global market-wide reference rate transition period, it is in effect from March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of the potential discontinuance of LIBOR in relation to the company’s line of credit and has not yet adopted the optional relief.

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Manager and Other Related Parties (Tables)

6 Months Ended

Jun. 30, 2021

Related Party Transactions [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable

Formation loan transactions for the six months ended June 30, 2021 and 2020 are presented in the following table.

	2021			2020
Balance, January 1	$	3,812,019		$	3,948,064
Payments received from RMC		(238,312	)		—
Early withdrawal penalties applied		(5,683	)		(11,995	)
Balance, June 30	$	3,568,024		$	3,936,069

Schedule of Unit Redemptions

Redemptions of members’ capital for the three and six months ended June 30, 2021 and 2020 are presented in the following table.

	Three months ended				Six months ended
Redemptions	2021		2020		2021		2020
Without penalty	$	1,682,981	$	444,922	$	2,432,327	$	762,594
With penalty		90,569		253,605		267,730		424,095
Total	$	1,773,550	$	698,527	$	2,700,057	$	1,186,689
Early withdrawal penalties	$	2,311	$	12,200	$	10,627	$	21,933

Summary of Organization and Offering Expenses

Unallocated O&O transactions for the six months ended June 30, 2021 and 2020 are summarized in the following table.

	2021			2020
Balance, January 1	$	1,858,282		$	2,260,068
O&O expenses allocated		(154,221	)		(160,909	)
O&O expenses paid by RMC(1)		(53,241	)		(20,861	)
Early withdrawal penalties applied (2)		(4,944	)		(9,938	)
Balance, June 30	$	1,645,876		$	2,068,360

(1) RMC is obligated per the Operating Agreement to repay RMI IX for the amount of unallocated O&O expenses attributed to a member’s capital account if the member redeems prior to the 40 quarterly allocations. RMC estimated its future obligation to repay unallocated O&O expenses on scheduled redemptions as of June 30, 2021, to be approximately $13,600, which may be offset in part by early withdrawal penalties collected in future periods.

(2) The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

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Loans (Tables)

6 Months Ended

Jun. 30, 2021

Secured Loan Principal Transactions

Secured loan transactions for the three and six months ended June 30, 2021 are summarized in the following table.

	Three months ended			Six months ended
Principal, beginning of period	$	83,364,317		$	82,274,807
Loans funded		12,190,000			18,380,800
Principal collected		(12,588,867	)		(19,903,312	)
Loans transferred from related mortgage fund		—			4,671,760
Loans transferred to related mortgage funds		(1,691,251	)		(2,559,588	)
Loans sold to non-affiliate		(1,398,000	)		(2,988,268	)
Principal, June 30	$	79,876,199		$	79,876,199

Secured Loans Characteristics

Secured loans had the characteristics presented in the following table.

	June 30,			December 31,
	2021			2020
Number of secured loans		59			82
Secured loans – principal	$	79,876,199		$	82,274,807
Secured loans – lowest interest rate (fixed)		6.8	%		6.8	%
Secured loans – highest interest rate (fixed)		10.5	%		10.5	%
Average secured loan – principal	$	1,353,834		$	1,003,351
Average principal as percent of total principal		1.7	%		1.2	%
Average principal as percent of members’ capital, net		1.7	%		1.3	%
Average principal as percent of total assets		1.7	%		1.2	%
Largest secured loan – principal	$	6,735,000		$	6,735,000
Largest principal as percent of total principal		8.4	%		8.2	%
Largest principal as percent of members’ capital, net		8.7	%		8.5	%
Largest principal as percent of total assets		8.2	%		7.9	%
Smallest secured loan – principal	$	62,795		$	104,378
Smallest principal as percent of total principal		0.1	%		0.1	%
Smallest principal as percent of members’ capital, net		0.1	%		0.1	%
Smallest principal as percent of total assets		0.1	%		0.1	%
Number of California counties where security is located		12			14
Largest percentage of principal in one California county		32.4	%		28.2	%
Number of secured loans with prepaid interest		2			—
Prepaid interest	$	148,000		$	—

Secured Loans by Lien Position in the Collateral

At funding, secured loans had the lien positions presented in the following table.

	June 30, 2021								December 31, 2020
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		41	$	67,320,452			84	%		56	$	61,066,097			74	%
Second trust deeds		18		12,555,747			16			26		21,208,710			26
Total principal, secured loans		59		79,876,199			100	%		82		82,274,807			100	%
Liens due other lenders at loan closing				35,215,207								45,206,740
Total debt			$	115,091,406							$	127,481,547
Appraised property value at loan closing			$	220,635,000							$	251,970,000
Percent of total debt to appraised values    (LTV) at loan closing(1)				55.7	%							55.6	%

(1) Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing nor does it include decreases or increases on senior liens to other lenders.

Secured Loans by Property Type of the Collateral

Secured loans summarized by property type are presented in the following table.

	June 30, 2021							December 31, 2020
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(2)		29	$	29,138,849		37	%		47	$	30,297,525		37	%
Commercial		24		46,561,191		58			27		43,692,125		53
Multi-family		5		2,676,159		3			8		8,285,157		10
Land		1		1,500,000		2			—		—		—
Total principal, secured loans		59	$	79,876,199		100	%		82	$	82,274,807		100	%

(2) Single family property type as of June 30, 2021 consists of 8 loans with principal of $9,240,711 that are owner occupied and 21 loans with principal of $19,898,138 that are non-owner occupied. At December 31, 2020, single family property type consisted of 8 loans with principal of $5,565,052 that are owner occupied and 39 loans with principal of $24,732,473 that are non-owner occupied.

Secured Loans Distributed within California

The distribution of secured loans within California by counties is presented in the following table.

	June 30, 2021					December 31, 2020
	Principal		Percent			Principal		Percent
San Francisco Bay Area(3)
Santa Clara	$	25,896,645		32.4	%	$	23,205,654		28.2	%
San Francisco		14,100,411		17.6			11,339,546		13.8
San Mateo		5,646,542		7.1			6,878,086		8.4
Alameda		3,403,137		4.3			6,790,814		8.2
Contra Costa		5,143,834		6.4			1,094,189		1.3
Marin		—		—			1,944,696		2.4
		54,190,569		67.8			51,252,985		62.3
Other Northern California
Placer		1,500,000		1.9			—		0.0
Monterey		—		0.0			1,110,000		1.4
Tehama		404,831		0.5			404,837		0.5
Sacramento		70,729		0.1			104,378		0.1
		1,975,560		2.5			1,619,215		2.0
Northern California Total		56,166,129		70.3			52,872,200		64.3
Los Angeles & Coastal
Los Angeles		7,734,845		9.7			11,775,334		14.3
San Diego		5,787,128		7.2			10,186,152		12.4
Orange		8,469,097		10.6			5,431,677		6.6
Santa Barbara		—		—			290,444		0.3
		21,991,070		27.5			27,683,607		33.6
Other Southern California
San Bernardino		1,719,000		2.2			1,719,000		2.1
Southern California Total		23,710,070		29.7			29,402,607		35.7
Total principal, secured loans	$	79,876,199		100.0	%	$	82,274,807		100.0	%

(3) Includes Silicon Valley

Secured Loans Scheduled Maturities

Secured loans scheduled to mature as of June 30, 2021, are presented in the following table.

	Loans		Principal		Percent
2021(4)		17	$	21,585,614		27	%
2022		23		27,199,427		34
2023		8		15,655,754		20
2024		2		3,939,766		5
2025		5		3,745,861		5
Thereafter		1		239,682		—
Total scheduled maturities		56		72,366,104		91
Matured as of June 30, 2021		3		7,510,095		9
Total principal, secured loans		59	$	79,876,199		100	%

(4) Loans scheduled to mature in 2021 after June 30. Includes one loan for which the company entered into a forbearance agreement with the borrower in February 2021 which deferred the maturity date until July 2021. The loan had principal of approximately $1,200,000, which matured December 1, 2020.

Past Due Financing Receivables

Secured loans summarized by payment-delinquency status are presented in the following table.

	June 30, 2021				December 31, 2020
	Loans		Principal		Loans		Principal
Current		50	$	67,262,102		73	$	74,041,631
Past Due
30-89 days		4		7,698,356		1		190,195
90-179 days		3		1,766,254		5		4,756,811
180 or more days		2		3,149,487		3		3,286,170
Total past due		9		12,614,097		9		8,233,176
Total principal, secured loans		59	$	79,876,199		82	$	82,274,807

Secured Loans in Non-Accrual Status

Secured loans in non-accrual status are summarized in the following table.

	June 30, 2021		December 31, 2020
Number of loans		4		3
Principal	$	4,329,684	$	3,339,684
Advances		20,941		10,320
Accrued interest		214,348		181,060
Total recorded investment	$	4,564,973	$	3,531,064
Foregone interest	$	239,583	$	62,821

Activity in Allowance for Loan Losses

Activity in the allowance for loan losses for the six months ended June 30, 2021 and 2020, is presented in the following table.

	2021		2020
Balance January 1,	$	55,000	$	87,000
Recovery for loan losses		—		(75	)
Charge-offs		—		(31,925	)
Balance June 30,	$	55,000	$	55,000

Impaired Loans [Member]

Impaired Financing Receivables

Loans designated impaired and any associated allowance for loan losses is presented in the following table.

	June 30, 2021			December 31, 2020
Number of loans		5			6
Principal	$	4,915,741		$	7,529,684
Recorded investment(9)		5,167,636			7,895,605
Impaired loans without allowance		5,167,636			7,895,605
Impaired loans with allowance		—			—
Allowance for loan losses, impaired loans		—			—
Weighted average LTV at origination		60.2	%		52.5	%

(9) Recorded investment is the sum of the principal, advances, and accrued interest receivable for financial reporting purposes.

Average Balances and Interest Income [Member]

Impaired Financing Receivables

Loans designated impaired had an average recorded investment, interest income recognized and interest income received in cash for the six months ended June 30, 2021 and the year ended December 31, 2020, as presented in the following table.

	June 30, 2021		December 31, 2020
Average recorded investment	$	6,531,621	$	6,307,655
Interest income recognized		48,186		704,506
Interest income received in cash		40,842		360,753

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Line Of Credit (Tables)

6 Months Ended

Jun. 30, 2021

Line Of Credit Facility [Abstract]

Schedule of Line of Credit Facilities Activity

In March 2020, RMI IX entered into a revolving line of credit and term loan agreement and in April 2020 borrowed on the bank line of credit. Activity involving the line of credit during the six months ended June 30, 2021 and 2020 is presented in the following table.

	2021			2020
Balance, January 1,	$	10,000,000		$	—
Draws		2,655,000			13,200,000
Repayments		(5,055,000	)		(5,000,000	)
Balance, June 30,	$	7,600,000		$	8,200,000
Line of credit - average daily balance	$	9,240,000		$	2,621,000

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Organization and General - Additional Information (Details)	6 Months Ended	117 Months Ended
	Jun. 30, 2021 USD ($) Unit	May 31, 2019	May 09, 2019 USD ($) shares
Organization and General (Details) [Line Items]
Members or partners capital, description	Cash available for distribution at the end of each calendar month is allocated ninety-nine percent (99%) to the members and one percent (1%) to the manager.
Percentage of distribution allocated to members	99.00%
Cumulative difference between earnings allocated to members' account and net income available to members	$ 139,000
Unit Redemption Program, Years After Purchase	1 year
Maximum capital units for redemption per quarter per individual | Unit	100,000
Maximum percentage of members total outstanding units for redemption per quarter per individual	25.00%
Maximum percentage of weighted average number of members outstanding units during twelve months for redemption	5.00%
Redemption Between Two to Three Years [Member]
Organization and General (Details) [Line Items]
Redemption value percentage of purchase price or capital account balance	94.00%
Redemption Between Three to Four Years [Member]
Organization and General (Details) [Line Items]
Redemption value percentage of purchase price or capital account balance	96.00%
Redemption Between Four to Five Years [Member]
Organization and General (Details) [Line Items]
Redemption value percentage of purchase price or capital account balance	98.00%
Redemption After Five Years [Member]
Organization and General (Details) [Line Items]
Redemption value percentage of purchase price or capital account balance	100.00%
DRIP [Member]
Organization and General (Details) [Line Items]
Gross proceeds from unit sales	$ 5,051,000
Member Units [Member]
Organization and General (Details) [Line Items]
Capital unit sold in public offering, shares | shares			15,000,000
Capital unit sold in public offering, value			$ 15,000,000
RMC [Member]
Organization and General (Details) [Line Items]
Percentage of profits and losses allocated to manager	1.00%
RMC [Member]
Organization and General (Details) [Line Items]
Ownership interest held by the manager		1.00%
Managers share of net income or loss		1.00%

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Summary of Significant Accounting Policies - Additional Information (Details)	6 Months Ended
	Jun. 30, 2021 USD ($) Approach
Summary of Significant Accounting Policies [Line Items]
Estimating Real Property Value, Number of Approaches | Approach	3
Impaired loans maximum days of delinquent	180 days
Interest Reserve Minimum Length	1 year
Interest Reserve Maximum Length	2 years
Maximum [Member]
Summary of Significant Accounting Policies [Line Items]
Federal Insurance Limit | $	$ 250,000

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Manager and Other Related Parties - Additional Information (Details)		3 Months Ended			6 Months Ended		12 Months Ended
		Jun. 30, 2021 USD ($)	Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2020 USD ($)	Jun. 30, 2021 USD ($) MortgageLoan	Jun. 30, 2020 USD ($) MortgageLoan Loan	Dec. 31, 2020 USD ($) MortgageLoan
Managers And Other Related Parties Details [Line Items]
Managers Share of net income or loss					1.00%
Liquidation offering proceeds, percentage					(7.00%)
Loan formations, amount					$ 5,626,566
Remaining performance obligation, amount		$ 3,568,024			3,568,024
Future redemptions of member's capital					1,205,307
Early withdrawal penalties	[1]				$ 4,944	$ 9,938
Reimbursement as a percentage of member's original purchase price					0.45%
Percentage of original purchase price, quarterly installment percentage					0.1125%
Payable to related party		13,826			$ 13,826		$ 4,185
Receivables from manager					56,387		2,267
Principal		79,876,199	$ 83,364,317		$ 79,876,199		$ 82,274,807
Reimbursement as a percentage of member's original purchase price | MortgageLoan			59		59		82
Mortgage Loans transferred On Real Estate Number Of Loans | Loan						0
Five Performing Loan [Member]
Managers And Other Related Parties Details [Line Items]
Principal		4,671,760			$ 4,671,760
Reimbursement as a percentage of member's original purchase price | MortgageLoan					5
One Performing Loan [Member]
Managers And Other Related Parties Details [Line Items]
Principal				$ 2,296,677		$ 2,296,677
Reimbursement as a percentage of member's original purchase price | MortgageLoan						1
Two Performing Loan [Member]
Managers And Other Related Parties Details [Line Items]
Principal		2,559,588			$ 2,559,588
Reimbursement as a percentage of member's original purchase price | MortgageLoan					5
Accounts Payable And Cost Reimbursements [Member]
Managers And Other Related Parties Details [Line Items]
Payable to related party							$ 6,452
Accounts Payable Related to Mortgage Fund [Member]
Managers And Other Related Parties Details [Line Items]
Payable to related party		$ 13,826			$ 13,826
Scheduled for Payment 2020 [Member]
Managers And Other Related Parties Details [Line Items]
Future redemptions of member's capital					944,301
Scheduled for Payment 2021 [Member]
Managers And Other Related Parties Details [Line Items]
Future redemptions of member's capital					261,006
Scheduled for Payment Penalty [Member]
Managers And Other Related Parties Details [Line Items]
Early withdrawal penalties					$ 141,008
RMC [Member]
Managers And Other Related Parties Details [Line Items]
Management Fee, Percentage		0.75%			0.75%
Working Capital Reserve, Percentage		2.00%			2.00%
Qualifying costs incurred		$ 158,526		138,098	$ 304,696	$ 290,814
Reimbursement of costs		$ 79,060		138,098	$ 160,434	290,814
Administrative Fees, Percentage		1.00%			1.00%
Administrative Fees Chargeable		$ 121,900		156,023	$ 183,808	219,759
Loan Brokerage Commission Percent Minimum		1.50%			1.50%
Loan Brokerage Commission Percent Maximum		5.00%			5.00%
Loan Brokerage Commissions, Maximum Percent of Assets		4.00%			4.00%
Loan Brokerage Commission		$ 266,000		345,000	$ 427,000	503,000
Repayment of formation loan in annual installments		496,000			$ 496,000
Formation loan payment date					Dec. 31, 2022
Loan quarterly payments of principal					$ 124,000
Future redemptions of member's capital		1,773,550		698,527	2,700,057	1,186,689
Early withdrawal penalties		$ 2,311		$ 12,200	$ 10,627	$ 21,933
Maximum [Member]
Managers And Other Related Parties Details [Line Items]
Annual mortgage servicing fees, percentage		0.25%			0.25%
Percentage of reimbursement of organization and offering expenses					4.50%
Reimbursement threshold					For each of forty (40) calendar quarters or portion thereof after December 31, 2015

[1] The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

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Manager and Other Related Parties - Formation Loan Transactions (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Formation Loan Transactions [Abstract]
Balance, January 1	$ 3,812,019	$ 3,948,064
Payments received from RMC	(238,312)
Early withdrawal penalties applied	(5,683)	(11,995)
Balance, June 30	$ 3,568,024	$ 3,936,069

XML

Manager and Other Related Parties - Schedule of Unit Redemptions (Details) - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020
Managers And Other Related Parties Details [Line Items]
Total, Capital redemptions				$ 1,205,307
Early withdrawal penalties	[1]			4,944	$ 9,938
RMC [Member]
Managers And Other Related Parties Details [Line Items]
Total, Capital redemptions		$ 1,773,550	$ 698,527	2,700,057	1,186,689
Early withdrawal penalties		2,311	12,200	10,627	21,933
RMC [Member] | Without Penalty [Member]
Managers And Other Related Parties Details [Line Items]
Total, Capital redemptions		1,682,981	444,922	2,432,327	762,594
RMC [Member] | With Penalty [Member]
Managers And Other Related Parties Details [Line Items]
Total, Capital redemptions		$ 90,569	$ 253,605	$ 267,730	$ 424,095

[1] The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

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Manager and Other Related Parties - Summary of Organization and Offering Expenses (Details) - USD ($)		6 Months Ended
		Jun. 30, 2021	Jun. 30, 2020
Related Party Transactions [Abstract]
Balance, January 1		$ 1,858,282	$ 2,260,068
O&O expenses allocated		(154,221)	(160,909)
O&O expenses paid by RMC	[1]	(53,241)	(20,861)
Early withdrawal penalties applied	[2]	(4,944)	(9,938)
Balance, June 30		$ 1,645,876	$ 2,068,360

[1] RMC is obligated per the Operating Agreement to repay RMI IX for the amount of unallocated O&O expenses attributed to a member’s capital account if the member redeems prior to the 40 quarterly allocations. RMC estimated its future obligation to repay unallocated O&O expenses on scheduled redemptions as of June 30, 2021, to be approximately $13,600, which may be offset in part by early withdrawal penalties collected in future periods.

[2] The O&O expenses component of early withdrawal penalties are applied as a reduction to O&O expenses to be repaid by RMC to members’ capital on scheduled redemptions. The amounts credited are determined by the ratio between the amount of the formation loan and the amount of offering costs incurred by the company.

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Manager and Other Related Parties - Summary of Organization and Offering Expenses (Parenthetical) (Details)	6 Months Ended
	Jun. 30, 2021 USD ($)
Related Party Transactions [Abstract]
Unallocated O&O expenses on units rebates period	120 months
Estimated future rebates on scheduled redemptions	$ 13,600

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Loans - Additional Information (Details)	1 Months Ended	3 Months Ended		6 Months Ended	12 Months Ended
	Oct. 30, 2020	Jun. 30, 2021 USD ($) Loan	Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan Loan	Dec. 31, 2020 USD ($) MortgageLoan Loan	Jun. 30, 2021	Jun. 30, 2021 MortgageLoan	Jun. 30, 2021 Loan	Jan. 31, 2021 USD ($)	Dec. 31, 2020 MortgageLoan	Dec. 31, 2020 Loan
Loans (Details) [Line Items]
Mortgage Loans on Real Estate, Number of Loans | MortgageLoan			59	59	82
Loans Receivable, Number of Principal and Interest Loans | Loan								29
Loans Receivable, Amortization Term				30 years
Number of loans | Loan		8		12
Aggregate principal renewed		$ 10,107,000		$ 13,498,000
Number of loans sold | Loan		2		5
Financing Receivable, Recorded Investment, Nonaccrual Status (in Dollars)		$ 1,398,000		$ 2,988,000
Loans Receivable Largest Loan (in Dollars)		6,735,000		6,735,000	$ 6,735,000
Loans - principal (in Dollars)		79,876,199	$ 83,364,317	79,876,199	82,274,807
Number of loans							0	59		0	82
Number of loans							0	59		0	82
Principal		79,876,199		79,876,199	82,274,807
Principal		79,876,199		79,876,199	82,274,807
Loans receivable extended maturity date	Mar. 31, 2021
Arrears on principal payments of non performing secured loans .		8,713,190		$ 8,713,190	$ 1,577,874
Non performing number of loans | Loan				9	8
Arrears on interest payments of non performing secured loans		470,041		$ 470,041	$ 360,813
Forbearance Agreement [Member]
Loans (Details) [Line Items]
Number of loans sold | Loan				1
Number of loans | MortgageLoan							2			2
Number of loans | MortgageLoan							2			2
Financing Receivables Ninety To One Hundred And Seventy Nine Days Past Due
Loans (Details) [Line Items]
Number of loans | Loan								3			5
Number of loans | Loan								3			5
Principal		1,766,254		$ 1,766,254	4,756,811
Principal		1,766,254		1,766,254	4,756,811
Financing Receivables Ninety To One Hundred And Seventy Nine Days Past Due | Forbearance Agreement [Member]
Loans (Details) [Line Items]
Number of loans | MortgageLoan							1			1
Number of loans | MortgageLoan							1			1
Principal		990,000		990,000	990,000
Principal		990,000		990,000	990,000
Past Due 180 Or More Days [Member]
Loans (Details) [Line Items]
Number of loans								2		1	3
Number of loans								2		1	3
Principal		3,149,487		3,149,487	3,286,170				$ 137,000
Principal		3,149,487		3,149,487	3,286,170				$ 137,000
Past Due 180 Or More Days [Member] | Forbearance Agreement [Member]
Loans (Details) [Line Items]
Number of loans | MortgageLoan							1			1
Number of loans | MortgageLoan							1			1
Principal		1,200,000		1,200,000	1,200,000
Principal		1,200,000		1,200,000	1,200,000
Past Due 90-179 Days [Member] | Commercial Building
Loans (Details) [Line Items]
Principal		990,000		990,000
Principal		990,000		$ 990,000
Loans receivables maturity date				Dec. 01, 2025
Past Due 366 Days [Member]
Loans (Details) [Line Items]
Principal		190,198		$ 190,198
Principal		190,198		$ 190,198
Loans receivables maturity date				Jun. 01, 2016
Loans receivable extended maturity date				Oct. 01, 2021
Loans, description				As of June 30, 2021, the loan was 90 days delinquent and was designated as impaired and in non-accrual status.
Financial Asset, Equal to or Greater than 90 Days Past Due
Loans (Details) [Line Items]
Number of loans | MortgageLoan							1			5
Number of loans | MortgageLoan							1			5
Financing receivable, recorded investment, 90 days past due and still accruing		586,000		$ 586,000	$ 4,703,296
Five Year Term or Less [Member]
Loans (Details) [Line Items]
Loans Receivable, Percent of Aggregate Principal						97.00%
Mortgage Loans on Real Estate, Number of Loans | MortgageLoan				53
Interest Only [Member]
Loans (Details) [Line Items]
Loans Receivable, Percent of Aggregate Principal						28.00%
Largest Loan [Member]
Loans (Details) [Line Items]
Loans Receivable, Yield of Loan Acquired						8.25%
Loans Receivable Maturity Date				Oct. 01, 2021
Construction Loans [Member]
Loans (Details) [Line Items]
Loans outstanding		0		$ 0
Construction Or Rehabilitation Loans [Member]
Loans (Details) [Line Items]
Loans - principal (in Dollars)		$ 0		$ 0
Minimum [Member]
Loans (Details) [Line Items]
Loans Receivable, Remaining Term				5 years

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Loans - Secured Loan Principal Transactions (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Receivables [Abstract]
Principal, beginning of period	$ 83,364,317	$ 82,274,807
Loans funded	12,190,000	18,380,800
Principal collected	(12,588,867)	(19,903,312)
Loans transferred from related mortgage fund		4,671,760
Loans transferred to related mortgage funds	(1,691,251)	(2,559,588)
Loans sold to non-affiliate	(1,398,000)	(2,988,268)
Principal, June 30	$ 79,876,199	$ 79,876,199

XML

Loans - Secured Loans Characteristics (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan Country	Dec. 31, 2020 USD ($) MortgageLoan Country
Secured Loan Transactions [Line Items]
Number of secured loans | MortgageLoan	59	59	82
Secured loans - principal (in Dollars)	$ 83,364,317	$ 79,876,199	$ 82,274,807
Average secured loan - principal (in Dollars)		$ 1,353,834	$ 1,003,351
Average principal as percent of total principal		1.70%	1.20%
Average principal as percent of members’ capital, net		1.70%	1.30%
Average principal as percent of total assets		1.70%	1.20%
Largest secured loan - principal (in Dollars)		$ 6,735,000	$ 6,735,000
Largest principal as percent of total principal		8.40%	8.20%
Largest principal as percent of members’ capital, net		8.70%	8.50%
Largest principal as percent of total assets		8.20%	7.90%
Smallest secured loan - principal (in Dollars)		$ 62,795	$ 104,378
Smallest principal as percent of total principal		0.10%	0.10%
Smallest principal as percent of members’ capital, net		0.10%	0.10%
Smallest principal as percent of total assets		0.10%	0.10%
Number of California counties where security is located | Country		12	14
Largest percentage of principal in one California county		32.40%	28.20%
Reimbursement as a percentage of member's original purchase price | MortgageLoan	59	59	82
Prepaid interest		$ 148,000
Prepaid Interest
Secured Loan Transactions [Line Items]
Number of secured loans | MortgageLoan		2
Reimbursement as a percentage of member's original purchase price | MortgageLoan		2
Minimum [Member]
Secured Loan Transactions [Line Items]
Secured loans - interest rate (fixed)	6.80%		6.80%
Maximum [Member]
Secured Loan Transactions [Line Items]
Secured loans - interest rate (fixed)	10.50%		10.50%

XML

Loans - Secured Loans by Lien Position in the Collateral (Details)		3 Months Ended	6 Months Ended	12 Months Ended
		Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan	Dec. 31, 2020 USD ($) MortgageLoan
Loans (Details) - Secured Loans by Lien Position in the Collateral [Line Items]
Number of secured loans | MortgageLoan		59	59	82
Loans - principal (in Dollars)		$ 83,364,317	$ 79,876,199	$ 82,274,807
Liens due other lenders at loan closing			35,215,207	45,206,740
Total debt			115,091,406	127,481,547
Appraised property value at loan closing			$ 220,635,000	$ 251,970,000
Percent of total debt to appraised values (LTV) at loan closing	[1]		55.70%	55.60%
Loans - percent			100.00%	100.00%
First Trust Deeds [Member]
Loans (Details) - Secured Loans by Lien Position in the Collateral [Line Items]
Number of secured loans | MortgageLoan			41	56
Loans - principal (in Dollars)			$ 67,320,452	$ 61,066,097
Loans - percent			84.00%	74.00%
Second Trust Deeds [Member]
Loans (Details) - Secured Loans by Lien Position in the Collateral [Line Items]
Number of secured loans | MortgageLoan			18	26
Loans - principal (in Dollars)			$ 12,555,747	$ 21,208,710
Loans - percent			16.00%	26.00%

[1] Based on appraised values and liens due other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing nor does it include decreases or increases on senior liens to other lenders.

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Loans - Secured Loans by Property Type (Details)		3 Months Ended	6 Months Ended	12 Months Ended
		Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan	Dec. 31, 2020 USD ($) MortgageLoan
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan		59	59	82
Loans - principal (in Dollars) | $		$ 83,364,317	$ 79,876,199	$ 82,274,807
Loans - percent			100.00%	100.00%
Single Family [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan	[1]		29	47
Loans - principal (in Dollars) | $	[1]		$ 29,138,849	$ 30,297,525
Loans - percent	[1]		37.00%	37.00%
Multifamily [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan			5	8
Loans - principal (in Dollars) | $			$ 2,676,159	$ 8,285,157
Loans - percent			3.00%	10.00%
Commercial [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan			24	27
Loans - principal (in Dollars) | $			$ 46,561,191	$ 43,692,125
Loans - percent			58.00%	53.00%
Land [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan			1
Loans - principal (in Dollars) | $			$ 1,500,000
Loans - percent			2.00%

[1] Single family property type as of June 30, 2021 consists of 8 loans with principal of $9,240,711 that are owner occupied and 21 loans with principal of $19,898,138 that are non-owner occupied. At December 31, 2020, single family property type consisted of 8 loans with principal of $5,565,052 that are owner occupied and 39 loans with principal of $24,732,473 that are non-owner occupied.

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Loans - Secured Loans by Property Type (Parenthetical) (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan	Dec. 31, 2020 USD ($) MortgageLoan
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan	59	59	82
Principal | $	$ 83,364,317	$ 79,876,199	$ 82,274,807
Single Family Property-Owner Occupied [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan		8	8
Principal | $		$ 9,240,711	$ 5,565,052
Single Family Property-NonOwner Occupied [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of secured loans | MortgageLoan		21	39
Principal | $		$ 19,898,138	$ 24,732,473

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Loans - Secured Loans Distributed Within California (Details) - USD ($)		Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 79,876,199	$ 83,364,317	$ 82,274,807
Loans - percent		100.00%		100.00%
San Francisco Bay Area [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 54,190,569		$ 51,252,985
Loans - percent	[1]	67.80%		62.30%
Santa Clara [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 25,896,645		$ 23,205,654
Loans - percent	[1]	32.40%		28.20%
San Mateo [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 5,646,542		$ 6,878,086
Loans - percent	[1]	7.10%		8.40%
San Francisco [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 14,100,411		$ 11,339,546
Loans - percent	[1]	17.60%		13.80%
Alameda [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 3,403,137		$ 6,790,814
Loans - percent	[1]	4.30%		8.20%
Contra Costa [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)	[1]	$ 5,143,834		$ 1,094,189
Loans - percent	[1]	6.40%		1.30%
Marin [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)				$ 1,944,696
Loans - percent				2.40%
Placer [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 1,500,000
Loans - percent		1.90%		0.00%
Other Northern California [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 1,975,560		$ 1,619,215
Loans - percent		2.50%		2.00%
Monterey [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)				$ 1,110,000
Loans - percent		0.00%		1.40%
Tehama [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 404,831		$ 404,837
Loans - percent		0.50%		0.50%
Sacramento [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 70,729		$ 104,378
Loans - percent		0.10%		0.10%
Northern California [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 56,166,129		$ 52,872,200
Loans - percent		70.30%		64.30%
Los Angeles & Coastal [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 21,991,070		$ 27,683,607
Loans - percent		27.50%		33.60%
Los Angeles [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 7,734,845		$ 11,775,334
Loans - percent		9.70%		14.30%
San Diego [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 5,787,128		$ 10,186,152
Loans - percent		7.20%		12.40%
Orange [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 8,469,097		$ 5,431,677
Loans - percent		10.60%		6.60%
Santa Barbara [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)				$ 290,444
Loans - percent				0.30%
San Bernardino [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 1,719,000		$ 1,719,000
Loans - percent		2.20%		2.10%
Southern California [Member]
Loans (Details) - Secured Loans Distributed Within California [Line Items]
Loans - principal (in Dollars)		$ 23,710,070		$ 29,402,607
Loans - percent		29.70%		35.70%

[1] Includes Silicon Valley

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Loans - Secured Loans Scheduled Maturities (Details)		3 Months Ended	6 Months Ended	12 Months Ended
		Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan	Dec. 31, 2020 USD ($) MortgageLoan
Secured Loans Scheduled Maturities [Abstract]
2021, Loans | MortgageLoan	[1]		17
2022, Loans | MortgageLoan			23
2023, Loans | MortgageLoan			8
2024, Loans | MortgageLoan			2
2025, Loans | MortgageLoan			5
Thereafter, Loans | MortgageLoan			1
Total scheduled maturities, Loans | MortgageLoan		56
Matured as of March 31, 2021, Loans | MortgageLoan			3
Number of secured loans | MortgageLoan		59	59	82
2021, Principal | $	[1]		$ 21,585,614
2022, Principal | $			27,199,427
2023, Principal | $			15,655,754
2024, Principal | $			3,939,766
2025, Principal | $			3,745,861
Thereafter, Principal | $			239,682
Total scheduled maturities, Principal | $			72,366,104
Matured as of March 31, 2021, Principal | $			7,510,095
Total principal, secured loans | $		$ 83,364,317	$ 79,876,199	$ 82,274,807
2021, Percent	[1]		27.00%
2022, Percent			34.00%
2023, Percent			20.00%
2024, Percent			5.00%
2025, Percent			5.00%
Total scheduled maturities, Percent			91.00%
Matured as of March 31, 2021, Percent			9.00%
Total principal, secured loans, Percent			100.00%	100.00%

[1] Loans scheduled to mature in 2021 after June 30. Includes one loan for which the company entered into a forbearance agreement with the borrower in February 2021 which deferred the maturity date until July 2021. The loan had principal of approximately $1,200,000, which matured December 1, 2020.

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Loans - Secured Loans Scheduled Maturities (Parenthetical) (Details)	3 Months Ended	6 Months Ended
	Jun. 30, 2021 USD ($) Loan	Jun. 30, 2021 USD ($) Loan	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of loans sold | Loan	2	5
Principal	$ 79,876,199	$ 79,876,199	$ 83,364,317	$ 82,274,807
San Bernardino [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Principal	1,719,000	$ 1,719,000		$ 1,719,000
Forbearance Agreement [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Number of loans sold | Loan		1
Forbearance Agreement [Member] | San Bernardino [Member]
Loans (Details) - Secured Loans by Property Type [Line Items]
Principal	$ 1,200,000	$ 1,200,000
Loans receivables maturity date		Dec. 01, 2020

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Loans - Past Due Financing Receivables (Details)	Jun. 30, 2021 USD ($)	Jun. 30, 2021 MortgageLoan	Jun. 30, 2021 Loan	Jan. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 MortgageLoan	Dec. 31, 2020 Loan
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans		0	59			0	82
Principal	$ 79,876,199				$ 82,274,807
Past Due 30-89 Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans | Loan			4				1
Principal	7,698,356				190,195
Financing Receivables Ninety To One Hundred And Seventy Nine Days Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans | Loan			3				5
Principal	1,766,254				4,756,811
Past Due 180 Or More Days [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans			2			1	3
Principal	3,149,487			$ 137,000	3,286,170
Current [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans | Loan			50				73
Principal	67,262,102				74,041,631
Total Payments Past Due
Financing Receivable, Recorded Investment, Past Due [Line Items]
Number of loans | Loan			9				9
Principal	$ 12,614,097				$ 8,233,176

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Loans - Schedule of Payments in Arrears Past Due Financing Receivables (Details)		Jun. 30, 2021 USD ($) Loan		Dec. 31, 2020 USD ($) Loan
Loans Details Secured Loans By Property Type Of Collateral [Line Items]
Monthly payments, interest		$ 94,500		$ 20,800
30-89 days [Member]
Loans Details Secured Loans By Property Type Of Collateral [Line Items]
Number of loans | Loan		3
Number of loans | Loan		1		1
Past maturity, principal		$ 7,510,095
Monthlypayments		789		$ 378
Past maturity, interest	[1]	37,813
Monthly payments, interest		2,987	[1]	1,509	[2]
Total payments		$ 7,551,684		$ 1,887
Past Due 90-179 Days [Member]
Loans Details Secured Loans By Property Type Of Collateral [Line Items]
Number of loans | Loan				1
Number of loans | Loan		3		4
Past maturity, principal				$ 376,613
Monthlypayments		$ 2,251		854
Monthly payments, interest		60,606	[1]	146,270	[2]
Total payments		$ 62,857		$ 523,737
Past Due 180 Or More Days [Member]
Loans Details Secured Loans By Property Type Of Collateral [Line Items]
Number of loans | Loan		1		1
Number of loans | Loan		1		1
Past maturity, principal		$ 1,200,000		$ 1,200,000
Monthlypayments		55		29
Past maturity, interest		168,000	[1]	105,000	[2]
Monthly payments, interest		200,635	[1]	108,034	[2]
Total payments		$ 1,568,690		$ 1,413,063
Total Payments Past Due
Loans Details Secured Loans By Property Type Of Collateral [Line Items]
Number of loans | Loan		4	[3]	2	[4]
Number of loans | Loan		5	[3]	6	[4]
Past maturity, principal		$ 8,710,095	[3]	$ 1,576,613	[4]
Monthlypayments		3,095	[3]	1,261	[4]
Past maturity, interest		205,813	[1],[3]	105,000	[2],[4]
Monthly payments, interest		264,228	[1],[3]	255,813	[2],[4]
Total payments		$ 9,183,231	[3]	$ 1,938,687	[4]

[1] Interest includes foregone interest of approximately $94,500 on non-accrual loans past maturity and approximately $112,500 for monthly payments in arrears. June 2021 interest is due July 1, 2021 and is not included in the payments in arrears at June 30, 2021.

[2] Interest includes foregone interest of $42,000 on non-accrual loans past maturity and approximately $20,800 for monthly payments in arrears.  December 2020 interest is due January 1, 2021 and is not included in the payments in arrears at December 31, 2020.

[3] In July 2021, three loans with aggregate principal of $7,510,095 included in the table above as 30-89 days past maturity, paid in full including interest in arrears of $37,813.

[4] One loan with principal of approximately $137,000, which was 180 or more days past due, paid in full in January 2021 and so was not designated as non-performing at December 31, 2020, and is not included in the table above.

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Loans - Schedule of Payments in Arrears Past Due Financing Receivables (parenthetical) (Details)	1 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended
	Jul. 31, 2021 USD ($) Loan	Mar. 31, 2021 MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan		Dec. 31, 2020 USD ($) MortgageLoan		Jun. 30, 2021 MortgageLoan	Jun. 30, 2021 Loan	Jan. 31, 2021 USD ($)	Dec. 31, 2020 MortgageLoan	Dec. 31, 2020 Loan
Loans (Details) [Line Items]
Monthly payments, interest			$ 94,500		$ 20,800
Forgone interest					$ 42,000
Interest, Due Date					Jan. 01, 2021
Reimbursement as a percentage of member's original purchase price | MortgageLoan		59	59		82
Number of loans							0	59		0	82
Principal			$ 79,876,199		$ 82,274,807
Past Due 180 Or More Days [Member]
Loans (Details) [Line Items]
Monthly payments, interest			200,635	[1]	108,034	[2]
Forgone interest			$ 112,500
Interest, Due Date			Jul. 01, 2021
Number of loans								2		1	3
Principal			$ 3,149,487		$ 3,286,170				$ 137,000
Subsequent Event
Loans (Details) [Line Items]
Reimbursement as a percentage of member's original purchase price | Loan	3
Aggregate principal amount of loans	$ 7,510,095
Inteest in arrears paid	$ 37,813

[1] Interest includes foregone interest of approximately $94,500 on non-accrual loans past maturity and approximately $112,500 for monthly payments in arrears. June 2021 interest is due July 1, 2021 and is not included in the payments in arrears at June 30, 2021.

[2] Interest includes foregone interest of $42,000 on non-accrual loans past maturity and approximately $20,800 for monthly payments in arrears.  December 2020 interest is due January 1, 2021 and is not included in the payments in arrears at December 31, 2020.

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Loans - Secured Loans in Non-Accrual Status (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2021 USD ($) MortgageLoan	Jun. 30, 2021 USD ($) MortgageLoan	Dec. 31, 2020 USD ($) MortgageLoan
Loans Details Secured Loans In Nonaccrual Status [Line Items]
Number of secured loans | MortgageLoan	59	59	82
Loans - principal (in Dollars)	$ 83,364,317	$ 79,876,199	$ 82,274,807
Accrued interest		$ 706,473	683,975
Forgone interest			$ 42,000
Non-Accrual Status [Member]
Loans Details Secured Loans In Nonaccrual Status [Line Items]
Number of secured loans | MortgageLoan		4	3
Loans - principal (in Dollars)		$ 4,564,973	$ 3,531,064
Accrued interest		214,348	181,060
Forgone interest		239,583	62,821
Principal [Member] | Non-Accrual Status [Member]
Loans Details Secured Loans In Nonaccrual Status [Line Items]
Loans - principal (in Dollars)		4,329,684	3,339,684
Advances [Member] | Non-Accrual Status [Member]
Loans Details Secured Loans In Nonaccrual Status [Line Items]
Loans - principal (in Dollars)		$ 20,941	$ 10,320

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Loans - Activity in the Allowance for Loan Losses (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Receivables [Abstract]
Balance, beginning of period	$ 55,000	$ 87,000
Recovery for loan losses	0	(75)
Charge-offs	0	(31,925)
Balance, end of period	$ 55,000	$ 55,000

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Loans - Schedule of Impaired Loans/Allowance for Loan Losses (Details)		6 Months Ended	12 Months Ended
		Jun. 30, 2021 USD ($) Loan	Dec. 31, 2020 USD ($) Loan
Secured Loans Designated as Impaired Loans [Abstract]
Number of loans | Loan		5	6
Principal		$ 4,915,741	$ 7,529,684
Recorded investment	[1]	5,167,636	7,895,605
Impaired loans without allowance		$ 5,167,636	$ 7,895,605
Weighted average LTV at origination		60.20%	52.50%

[1] Recorded investment is the sum of the principal, advances, and accrued interest receivable for financial reporting purposes.

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Loans - Impaired Loans - Average Balances and Interest Income (Details) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2021	Dec. 31, 2020
Impaired Loans - Average Balances and Interest Income [Abstract]
Average recorded investment	$ 6,531,621	$ 6,307,655
Interest income recognized	48,186	704,506
Interest income received in cash	$ 40,842	$ 360,753

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Line of Credit - Schedule of Line of Credit Facilities Activity (Details) - USD ($)	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020
Debt Disclosure [Abstract]
Balance, January 1,	$ 10,000,000
Draws	2,655,000	$ 13,200,000
Repayments	(5,055,000)	(5,000,000)
Balance, June 30,	7,600,000	8,200,000
Line of credit - average daily balance	$ 9,240,000	$ 2,621,000

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Line of Credit - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2021	Jun. 30, 2020	Jun. 30, 2021	Jun. 30, 2020	Dec. 31, 2020	Sep. 30, 2020
Short Term Debt [Line Items]
Line of credit facility, maximum amount outstanding during period	$ 10,000,000		$ 10,000,000
Maturity date			Mar. 31, 2022
Line of credit facility, conversion of outstanding principal balance to term loan of fee			0.25%
Line of credit extended maturity date			Mar. 31, 2022
Line of credit facility, description			The company has the option at the maturity date to convert the then outstanding principal balance on the line of credit to a one-year term loan - for a fee of one-quarter of one percent (0.25%) – thereby extending the maturity date to March 2023.
Pledged loans, principal amount	17,835,000		$ 17,835,000		$ 20,068,000
Amortization of debt issuance costs	13,700	$ 13,600	$ 27,402	$ 13,618
Term loan, duration			2 years
Maximum [Member]
Short Term Debt [Line Items]
Pledged loans, advance amount	$ 10,000,000		$ 10,000,000
Revolving Credit Facility [Member]
Short Term Debt [Line Items]
Line of credit facility, description			Interest on the outstanding principal is payable monthly and accrues at the per annum rate of the greater of (i) five percent (5%) or (ii) the sum of the one-month LIBOR rate plus three and one-quarter percent (3.25%).
Line of credit facility, interest rate	5.00%		5.00%
Compensating balance, minimum	$ 1,000,000.0		$ 1,000,000.0
Interest on non maintenance of compensating balance			0.25%
Line of credit facility, average rate			50.00%
Line of credit facility, unused line of fee			0.50%
Debt issuance costs						$ 110,000
Line Of Credit [Member] | Minimum [Member]
Short Term Debt [Line Items]
Minimum tangible net worth	$ 50,000,000		$ 50,000,000
Debt service coverage ratio			1.00
Line Of Credit [Member] | Maximum [Member]
Short Term Debt [Line Items]
Debt service coverage ratio			2.00
Line Of Credit [Member] | Maximum [Member] | Financial Asset, 61 Days Past Due [Member]
Short Term Debt [Line Items]
Loan payment, quartely			10.00%
London Interbank Offered Rate (LIBOR) [Member] | Revolving Credit Facility [Member]
Short Term Debt [Line Items]
Line of credit facility, interest rate	3.25%		3.25%

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Subsequent Events - Additional Information (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2021 Loan	Dec. 31, 2020 USD ($) Loan
Subsequent Event [Line Items]
Non performing number of loans | Loan	9	8
Forgone interest | $		$ 42,000
Subsequent Event Description	The manager evaluated events occurring subsequent to June 30, 2021 and determined that there were no events or transactions occurring during this reporting period that require recognition or disclosure in the unaudited financial statements