NOTES AND INTEREST RECEIVABLE

9 Months Ended

Sep. 30, 2014

NOTES AND INTEREST RECEIVABLE

NOTES AND INTEREST RECEIVABLE

 NOTE 3. NOTES AND INTEREST RECEIVABLE

A portion of our assets are invested in mortgage notes receivable, principally secured by real estate. We may originate mortgage loans in conjunction with providing purchase money financing of property sales. Notes receivable are generally collateralized by real estate or interests in real estate and personal guarantees of the borrower and, unless noted otherwise, are so secured. Management intends to service and hold for investment the mortgage notes in our portfolio. A majority of the notes receivable provide for principal to be paid at maturity.  Our mortgage notes receivable consist of first, wraparound and junior mortgage loans (dollars in thousands):

		Maturity	Interest
Borrower		Date	Rate	Amount	Security
Performing loans:
	Foundation for Better Housing, Inc. (Preserve at Prairie Pointe) (1)	03/19	12.00%	$      1,810	Secured
	Foundation for Better Housing, Inc. (Preserve at Prairie Pointe) (1)	03/17	12.00%	1,156	Secured
	Foundation for Better Housing, Inc. (Vista Ridge) (1)	04/19	12.00%	3,923	Secured
	Foundation for Better Housing, Inc. (Vista Ridge) (1)	06/17	12.00%	1,492	Secured
	HGH Residential, Inc. (Park West I Apts)	07/19	12.00%	1,102	Secured
	HGH Residential, Inc. (Park West II Apts)	07/19	12.00%	4,771	Secured
	HGH Residential, Inc. (Tradewinds Development)	07/19	12.00%	6,131	Secured
	Unified Housing Foundation, Inc. (Echo Station) (1)	12/32	12.00%	1,481	100% Interest in Unified Housing of Temple, LLC
	Unified Housing Foundation, Inc. (Lakeshore Villas) (1)	12/32	12.00%	2,000	Secured
	Unified Housing Foundation, Inc. (Lakeshore Villas) (1)	12/32	12.00%	6,363	Membership interest in Housing for Seniors of Humble, LLC
	Unified Housing Foundation, Inc. (Limestone Canyon) (1)	12/32	12.00%	4,663	100% Interest in Unified Housing of Austin, LLC
	Unified Housing Foundation, Inc. (Limestone Canyon) (1)	12/32	12.00%	3,057	100% Interest in Unified Housing of Austin, LLC
	Unified Housing Foundation, Inc. (Limestone Ranch) (1)	12/32	12.00%	6,000	100% Interest in Unified Housing of Vista Ridge, LLC
	Unified Housing Foundation, Inc. (Limestone Ranch) (1)	12/32	12.00%	2,250	100% Interest in Unified Housing of Vista Ridge, LLC
	Unified Housing Foundation, Inc. (Parkside Crossing) (1)	12/32	12.00%	1,936	100% Interest in Unified Housing of Parkside Crossing, LLC
	Unified Housing Foundation, Inc. (Sendero Ridge) (1)	12/32	12.00%	4,812	100% Interest in Unified Housing of Sendero Ridge, LLC
	Unified Housing Foundation, Inc. (Sendero Ridge) (1)	12/32	12.00%	5,174	100% Interest in Unified Housing of Sendero Ridge, LLC
	Unified Housing Foundation, Inc. (Timbers of Terrell) (1)	12/32	12.00%	1,323	100% Interest in Unified Housing of Terrell, LLC
	Unified Housing Foundation, Inc. (Tivoli) (1)	12/32	12.00%	7,966	100% Interest in Unified Housing of Tivoli, LLC
	Unified Housing Foundation, Inc. (1)	06/17	12.00%	1,261	Unsecured
	Unified Housing Foundation, Inc. (1)	03/17	5.00%	6,000	Unsecured
	Other related party notes (1)	Various	Various	768	Various secured interests
	Other related party notes (1)	Various	Various	3,568	Various unsecured interests
	Accrued interest			3,197
Total Performing				$    82,204
Non-Performing loans:
	Other non-related party notes	Various	Various	507	Secured
	Accrued interest			67
Total Non-Performing				$         574
	Allowance for doubtful accounts			(1,990)
Total				$    80,788
(1)  Related party notes

At September 30, 2014, we had junior mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $68.0 million.  We recognized interest income of $6.7 million related to these notes receivables.

The Company has various notes receivable from Unified Housing Foundation, Inc. (“UHF”) and Foundation for Better Housing, Inc. (“FBH”).  UHF and FBH are determined to be related parties due to our significant investment in the performance of the collateral secured under the notes receivable.  Payments are due from surplus cash flow of operations of the properties.  A sale or refinance of any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes for the specific borrower.  These notes are cross-collateralized for the specific borrower, but to the extent cash is received from a specific UHF or FBH property, it is applied first against any outstanding interest for the related-property note.  The allowance on the UHF notes was a purchase allowance that was netted against the notes when acquired.

In the 1st quarter of 2014, the Company obtained $3.2 million in notes and accrued interest receivable from Realty Advisors Inc. (“RAI”), a related party.  These notes are due from FBH, a related party.  The notes accrue interest at 12% and mature at various times.

In the 2nd quarter of 2014, the Company obtained $4.0 million in a note receivable from RAI.  This note is due from FBH.  The note accrues interest at 12% and matures in April, 2019.

In the 3rd quarter of 2014, the Company obtained $3.4 million in notes receivable from RAI.  $2.8 million of the notes are due from UHF, and $0.6 million are due from FBH, both are related parties.  These notes accrue interest at 12% and have various maturity dates in 2017.

In the 3rd quarter of 2014, the Company obtained $1.5 million in a note receivable from Regis, a related party.  This note is due from FBH.    The note accrues interest at 12% and matures in June, 2017.

In the 3rd quarter of 2014, the Company obtained $0.5 million in a note and accrued interest receivable from Basic Capital Management, Inc. (“Basic”), a related party.  The note is due from UHF, The note accrues interest at 5.25% until August, 2015 then at 12% until maturity in December, 2027.