Note 7 - Transactions with Affiliates (Restated)

6 Months Ended

Jun. 30, 2011

Related Party Transactions Disclosure [Text Block]

NOTE 7 - TRANSACTIONS WITH AFFILIATES (RESTATED)

In consideration of the management services rendered to the Partnership, Owens Financial Group, Inc. (“OFG”), the General Partner, is entitled to receive from the Partnership a management fee payable monthly, subject to a maximum of 2.75% per annum of the average unpaid balance of the Partnership’s mortgage loans.

All of the Partnership’s loans are serviced by OFG, in consideration for which OFG receives up to 0.25% per annum of the unpaid principal balance of the loans.

OFG, at its sole discretion may, on a monthly basis, adjust the management and servicing fees as long as they do not exceed the allowable limits calculated on an annual basis. Even though the fees for a month may exceed 1/12 of the maximum limits, at the end of the calendar year the sum of the fees collected for each of the 12 months must be equal to or less than the stated limits. Management fees amounted to approximately $531,000 and $481,000 for the three months ended June 30, 2011 and 2010, respectively, and $1,286,000 and $1,055,000 for the six months ended June 30, 2011 and 2010, respectively, and are included in the accompanying consolidated statements of operations. Servicing fees amounted to approximately $74,000 and $127,000 for the three months ended June 30, 2011 and 2010, respectively, and $156,000 and $260,000 for the six months ended June 30, 2011 and 2010, respectively, and are included in the accompanying consolidated statements of operations. As of June 30, 2011 and December 31, 2010, the Partnership owed management and servicing fees to OFG in the amount of approximately $399,000 and $157,000, respectively.

The maximum servicing fees were paid to the General Partner during the three and six months ended June 30, 2011 and 2010. If the maximum management fees had been paid to the General Partner during the three and six months ended June 30, 2011, the management fees would have been $809,000 (increase of $278,000) and $1,715,000 (increase of $429,000), respectively, which would have increased net loss allocated to limited partners by approximately 29.8% and 28.2%, respectively, and net loss allocated to limited partners per weighted average limited partner unit by the same percentages to a loss of $.004 and $.007, respectively, from a loss of $.003 and $.005, respectively. If the maximum management fees had been paid to the General Partner during the three and six months ended June 30, 2010, the management fees would have been $1,400,000 (increase of $919,000) and $2,858,000 (increase of $1,802,000), respectively, which would have increased net loss allocated to limited partners by approximately 62% and 179%, respectively, and net loss allocated to limited partners per weighted average limited partner unit by the same percentages to a loss of $.008 and $.010, respectively, from a loss of $.005 and $.003, respectively.

In determining the yield to the partners and hence the management fees, OFG may consider a number of factors, including current market yields, delinquency experience, un-invested cash and real estate activities. OFG expects that the management fees it receives from the Partnership will vary in amount and percentage from period to period, and it is highly likely that OFG will again receive less than the maximum management fees in the future. However, if OFG chooses to take the maximum allowable management fees in the future, the yield paid to limited partners may be reduced.

Pursuant to the Partnership Agreement, OFG receives all late payment charges from borrowers on loans owned by the Partnership, with the exception of loans participated with outside entities. The amounts paid to or collected by OFG for such charges totaled approximately $322,000 and $0 for the three months ended June 30, 2011 and 2010, respectively, and $774,000 and $128,000 for the six months ended June 30, 2011 and 2010, respectively. In addition, the Partnership remits other miscellaneous fees to OFG, which are collected from loan payments, loan payoffs or advances from loan principal (i.e. funding, demand and partial release fees). Such fees remitted to OFG totaled approximately $0 and $3,000 for the three months ended June 30, 2011 and 2010, respectively, and $8,000 and $7,000 for the six months ended June 30, 2011 and 2010, respectively.

OFG originates all loans the Partnership invests in and receives loan origination and extension fees from borrowers. Such fees paid to OFG amounted to approximately $90,000 and $0 on loans originated or extended of approximately $2,406,000 and $0 for the three months ended June 30, 2011 and 2010, respectively, and $168,000 and $32,000 on loans originated or extended of approximately $10,240,000 and $800,000 for the six months ended June 30, 2011 and 2010, respectively. A loan fee paid to OFG in the amount of $78,000 during the six months ended June 30, 2011 was collected from the borrower upon payoff of the related loan in December 2010 and remitted to OFG in January 2011.

OFG is reimbursed by the Partnership for the actual cost of goods, services and materials used for or by the Partnership and obtained from unaffiliated entities and the salary and related salary expense of OFG’s non-management and non-supervisory personnel performing services for the Partnership which could be performed by independent parties (subject to certain limitations in the Partnership Agreement). The amounts reimbursed to OFG by the Partnership were $156,000 and $15,000 during the three months ended June 30, 2011 and 2010, respectively, and $318,000 and $31,000 during the six months ended June 30, 2011 and 2010, respectively.

As of June 30, 2011 and 2010, the General Partner held second and fourth deeds of trust in the total amount of approximately $853,000 secured by the same property (and to the same borrower) on which the Partnership has a first deed of trust in the amount of $2,200,000 at an interest rate of 12% per annum.  Approximately $517,000 of the General Partner’s second deed of trust is an exit fee included in the deed of trust at the time of loan origination in 2006. The interest rate on the General Partner’s loan is 17% per annum. The loans to the Partnership and the General Partner are greater than ninety days delinquent and past maturity as of June 30, 2011.