Note 2 - Loans Secured by Trust Deeds

6 Months Ended

Jun. 30, 2011

Mortgage Loans on Real Estate, by Loan Disclosure [Text Block]

NOTE 2 - LOANS SECURED BY TRUST DEEDS

Loans secured by trust deeds as of June 30, 2011 and December 31, 2010 are as follows:

	2011		2010
By Property Type:
Commercial	$	46,515,991	$	69,024,479
Condominiums		14,546,722		41,037,978
Single family homes (1-4 units)		250,000		325,125
Improved and unimproved land		47,277,913		47,277,913
	$	108,590,626	$	157,665,495
By Deed Order:
First mortgages	$	91,132,472	$	139,169,446
Second and third mortgages		17,458,154		18,496,049
	$	108,590,626	$	157,665,495

Scheduled maturities of loans secured by trust deeds as of June 30, 2011 and the interest rate sensitivity of such loans are as follows: 

	Fixed		Variable
	Interest		Interest
	Rate		Rate		Total
Year ending June 30:
2011 (past maturity)	$	73,480,445	$	—	$	73,480,445
2012		17,423,678		—		17,423,678
2013		1,100,000		2,000,000		3,100,000
2014		600,000		9,000,000		9,600,000
2015		—		—		—
Thereafter (through 2016)		—		4,986,503		4,986,503
	$	92,604,123	$	15,986,503	$	108,590,626

Variable rate loans use as indices the one-year, five-year and 10-year Treasury Constant Maturity Index (0.19%, 1.76% and 3.18%, respectively, as of June 30, 2011), the prime rate (3.25% as of June 30, 2011) or the weighted average cost of funds index for Eleventh District savings institutions (1.34% as of June 30, 2011) or include terms whereby the interest rate is adjusted at a specific later date. Premiums over these indices have varied from 2.0% to 6.5% depending upon market conditions at the time the loan is made.

The following is a schedule by geographic location of loans secured by trust deeds as of June 30, 2011 and December 31, 2010:

	June 30, 2011		Portfolio	December 31, 2010		Portfolio
	Balance		Percentage	Balance		Percentage
Arizona	$	7,535,000	6.94%	$	7,535,000	4.78%
California		55,999,893	51.57%		80,608,323	51.12%
Colorado		15,828,102	14.58%		15,828,102	10.04%
Florida		—	0%		26,257,122	16.65%
Hawaii		2,000,000	1.84%		2,000,000	1.27%
Idaho		2,200,000	2.03%		2,200,000	1.40%
Nevada		1,087,700	1.00%		1,087,700	0.69%
New York		10,500,000	9.67%		10,500,000	6.66%
Oregon		—	0%		75,125	0.05%
Pennsylvania		4,021,946	3.70%		1,922,003	1.22%
Utah		3,511,722	3.23%		3,745,857	2.38%
Washington		5,906,263	5.44%		5,906,263	3.74%
	$	108,590,626	100.00%	$	157,665,495	100.00%

As of June 30, 2011 and December 31, 2010, the Partnership’s loans secured by deeds of trust on real property collateral located in Northern California totaled approximately 47% ($50,925,000) and 39% ($60,854,000), respectively, of the loan portfolio. The Northern California region (which includes Monterey, Fresno, Kings, Tulare and Inyo counties and all counties north) is a large geographic area which has a diversified economic base. The ability of borrowers to repay loans is influenced by the economic strength of the region and the impact of prevailing market conditions on the value of real estate. In addition, as of June 30, 2011, approximately 60% of the Partnership’s mortgage loans were secured by real estate located in the states of California, Arizona and Nevada, which have experienced dramatic reductions in real estate values over the past three years.

During the six months ended June 30, 2011, the Partnership extended, by one year or less, the maturity dates of two loans with aggregate principal balances totaling $3,494,000. During the six months ended June 30, 2010, the Partnership extended to December 31, 2011 the maturity date of one loan with a principal balance of $800,000.

As of June 30, 2011 and December 31, 2010, approximately $98,529,000 (90.7 %) and $147,451,000 (93.5%) of Partnership loans are interest-only and require the borrower to make a “balloon payment” on the principal amount upon maturity of the loan. To the extent that a borrower has an obligation to pay mortgage loan principal in a large lump sum payment, its ability to satisfy this obligation may be dependent upon its ability to sell the property, obtain suitable refinancing or otherwise raise a substantial cash amount. As a result, these loans involve a higher risk of default than fully amortizing loans. Borrowers occasionally are not able to pay the full amount due at the maturity date.  The Partnership may allow these borrowers to continue making the regularly scheduled monthly interest payments for certain periods of time to assist the borrower in meeting the balloon payment obligation without formally filing a notice of default.  These loans for which the principal is due and payable, but the borrower has failed to make such payment of principal are referred to as “past maturity loans”. As of June 30, 2011 and

December 31, 2010, the Partnership had twenty-three and twenty-seven past maturity loans totaling approximately $73,480,000 and $122,402,000, respectively.

As of June 30, 2011 and December 31, 2010, the Partnership had twenty-five and twenty-four loans, respectively, that were impaired, delinquent in monthly payments greater than ninety days and/or in the process of foreclosure totaling approximately $79,826,000 (74%) and $121,565,000 (77%), respectively.  This included twenty-two past maturity loans totaling $72,790,000 (67%) and $119,084,000 (76%), respectively. In addition, one and five loans totaling approximately $690,000 (0.6%) and $3,318,000 (2%), respectively, were past maturity but current in monthly payments as of June 30, 2011 and December 31, 2010, respectively (combined total of impaired and past maturity loans of $80,516,000 (74%) and $124,883,000 (79%), respectively). Of the impaired and past maturity loans, approximately $26,948,000 (25%) and $46,078,000 (29%), respectively, were in the process of foreclosure and $29,278,000 (27%) and $53,606,000 (34%), respectively, involved borrowers who were in bankruptcy as of June 30, 2011 and December 31, 2010. During the quarter ended June 30, 2011, one delinquent Partnership loan was partially paid down by the borrower in the amount of $12,580,000.

During the six months ended June 30, 2011 and 2010, the Partnership foreclosed on four loans and one loan, respectively, with aggregate principal balances totaling approximately $34,832,000 and $9,592,000, respectively, and obtained the properties via the trustee’s sales.

During the quarter ended June 30, 2011, the Partnership assigned two first mortgage loans secured by the same property with an aggregate principal balance totaling $3,500,000 to a new wholly owned LLC entity (Broadway & Commerce, LLC). These loans were then foreclosed upon by the new LLC entity in July 2011 (subsequent to quarter end) and the property was obtained via the trustee’s sale. In addition, during the quarter ended June 30, 2011, the Partnership assigned one first mortgage loan that was purchased by the Partnership at a discount in 2010, with a principal balance of approximately $602,000, to a new wholly owned LLC entity (Bensalem Primary Fund, LLC).