10.

Mortgages

We have nonrecourse mortgage loans for

certain communities totaling

$64

million (net of debt issuance costs) at both

January 31, 2018

and

October 31, 2017,

respectively, which are secured by the related real property, including any improvements, with an aggregate book value of

$172.7

million and

$157.8

million, respectively. The weighted-average interest rate on these obligations was

5.3%

at both

January 31, 2018

and

October 31, 2017

and the mortgage loan payments on each community primarily correspond to home deliveries. We also had nonrecourse mortgage loans on our corporate headquarters totaling

$13.0

million at

October 31, 2017.

November 1, 2017,

these loans were paid in full in connection with the sale of our corporate headquarters building

K. Hovnanian Mortgage originates mortgage loans primarily from the sale of our homes. Such mortgage loans and related servicing rights are sold in the secondary mortgage market within a short period of time. In certain instances, we retain the servicing rights for a small amount of loans. K. Hovnanian Mortgage finances the origination of mortgage loans through various master repurchase agreements, which are recorded in financial services liabilities on the Condensed Consolidated Balance Sheets.

Our secured Master Repurchase Agreement with JPMorgan Chase Bank, N.A. (“Chase Master Repurchase Agreement”), which was amended on

January 31, 2018

to extend the maturity to

January 31, 2019,

is a short-term borrowing facility that provides up to

$50.0

million through maturity. The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly on outstanding advances at an adjusted LIBOR rate, which was

1.58%

January 31, 2018,

plus the applicable margin of

2.5%

2.63%

based upon type of loan. As of

January 31, 2018

and

October 31, 2017,

the aggregate principal amount of all borrowings outstanding under the Chase Master Repurchase Agreement was

$21.3

million and

$41.5

million, respectively.

K. Hovnanian Mortgage has another secured Master Repurchase Agreement

with Customers Bank (“Customers Master Repurchase Agreement”), which was amended on

February 16, 2018.

The Customers Master Repurchase Agreement is a short-term borrowing facility that provides up to

$50.0

million through its maturity on

February 15, 2019.

The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable daily or as loans are sold to permanent investors on outstanding advances at the current LIBOR rate, plus the applicable margin ranging from

2.375%

5.125%

based on the type of loan and the number of days outstanding on the warehouse line. As of

January 31, 2018

and

October 31, 2017,

the aggregate principal amount of all borrowings outstanding under the Customers Master Repurchase Agreement was

$29.6

million and

$40.7

million, respectively.

K. Hovnanian Mortgage also has a secured Master Repurchase Agreement with Comerica Bank (“

Comerica Master Repurchase Agreement”), which was amended on

December 22, 2017,

that is a short-term borrowing facility that provides up to

$50.0

million through

December 20, 2018.

The loan is secured by the mortgages held for sale and is repaid when we sell the underlying mortgage loans to permanent investors. Interest is payable monthly at the current LIBOR rate, subject to a floor of

0.25%,

plus the applicable margin of

2.375%.

As of

January 31, 2018

and

October 31, 2017,

the aggregate principal amount of all borrowings outstanding under the Comerica Master Repurchase Agreement was

$12.1

million and

$32.4

million, respectively.

The Chase Master Repurchase Agreement, Customers Master Repurchase Agreement and Comerica Master Repurchase Agreement (together, the “

Master Repurchase Agreements”) require K. Hovnanian Mortgage to satisfy and maintain specified financial ratios and other financial condition tests. Because of the extremely short period of time mortgages are held by K. Hovnanian Mortgage before the mortgages are sold to investors (generally a period of a few weeks), the immateriality to us on a consolidated basis of the size of the Master Repurchase Agreements, the levels required by these financial covenants, our ability based on our immediately available resources to contribute sufficient capital to cure any default, were such conditions to occur, and our right to cure any conditions of default based on the terms of the applicable agreement, we do

not

consider any of these covenants to be substantive or material. As of

January 31, 2018,

we believe we were in compliance with the covenants under the Master Repurchase Agreements.