Note 2 - Loans Secured by Trust Deeds

9 Months Ended

Sep. 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 September 30, 2011 and December 31, 2010 are as follows:

	2011		2010
By Property Type:
Commercial	$	40,097,256	$	69,024,479
Condominiums		10,369,535		41,037,978
Single family homes (1-4 units)		250,000		325,125
Improved and unimproved land		45,077,912		47,277,913
	$	95,794,703	$	157,665,495
By Deed Order:
First mortgages	$	75,079,728	$	139,169,446
Second and third mortgages		20,714,975		18,496,049
	$	95,794,703	$	157,665,495

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

	Fixed		Variable
	Interest Rate		Interest Rate		Total
Year ending September 30:
2011 (past maturity)	$	61,693,672	$	—	$	61,693,672
2012		16,335,978		—		16,335,978
2013		1,700,000		2,000,000		3,700,000
2014		—		9,000,000		9,000,000
2015		—		—		—
2016		—		4,946,070		4,946,070
Thereafter (through 2018)		118,983		—		118,983
	$	79,848,633	$	15,946,070	$	95,794,703

Variable rate loans use as indices the one-year, five-year and 10-year Treasury Constant Maturity Index (0.13%, 0.96% and 1.92%, respectively, as of September 30, 2011), the prime rate (3.25% as of September 30, 2011) or the weighted average cost of funds index for Eleventh District savings institutions (1.32% as of September 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 September 30, 2011 and December 31, 2010:

	September 30, 2011		Portfolio			December 31, 2010		Portfolio
	Balance		Percentage			Balance		Percentage
Arizona	$	7,535,000		7.87	%	$	7,535,000		4.78	%
California		50,668,857		52.89	%		80,608,323		51.12	%
Colorado		15,828,102		16.52	%		15,828,102		10.04	%
Florida		—		—	%		26,257,122		16.65	%
Hawaii		2,000,000		2.09	%		2,000,000		1.27	%
Idaho		—		—	%		2,200,000		1.40	%
Nevada		—		—	%		1,087,700		0.69	%
New York		10,500,000		10.96	%		10,500,000		6.66	%
Oregon		—		—	%		75,125		0.05	%
Pennsylvania		4,021,946		4.20	%		1,922,003		1.22	%
Utah		2,834,535		2.96	%		3,745,857		2.38	%
Washington		2,406,263		2.51	%		5,906,263		3.74	%
	$	95,794,703		100.00	%	$	157,665,495		100.00	%

As of September 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 53% ($50,669,000) 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 September 30, 2011, approximately 61% of the Partnership’s mortgage loans were secured by real estate located in the states of California and Arizona, which have experienced dramatic reductions in real estate values over the past three years.

During the nine months ended September 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 nine months ended September 30, 2010, the Partnership extended to December 31, 2011 the maturity date of one loan with a principal balance of $800,000.

As of September 30, 2011 and December 31, 2010, approximately $90,730,000 (94.7%) 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. In recent years, many borrowers on Partnership loans have been unable to pay the full amount due at the maturity date.  The Partnership has allowed some of these borrowers to continue make 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 September 30, 2011 and December 31, 2010, the Partnership had eighteen and twenty-seven past maturity loans totaling approximately $61,694,000 and $122,402,000, respectively.

As of September 30, 2011 and December 31, 2010, the Partnership had twenty-one 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 $68,159,000 (71%) and $121,565,000 (77%), respectively.  This included seventeen and twenty-two past maturity loans totaling $61,004,000 (64%) and $119,084,000 (76%), respectively. In addition, one and five loans totaling approximately $690,000 (0.7%) and $3,318,000 (2%), respectively, were past maturity but current in monthly payments as of September 30, 2011 and December 31, 2010, respectively (combined total of impaired and past maturity loans of $68,849,000 (72%) and $124,883,000 (79%), respectively). Of the impaired and past maturity loans, approximately $23,878,000 (25%) and $46,078,000 (29%), respectively, were in the process of foreclosure and $24,203,000 (25%) and $53,606,000 (34%), respectively, involved borrowers who were in bankruptcy as of September 30, 2011 and December 31, 2010.

During the nine months ended September 30, 2011 and 2010, the Partnership foreclosed on eight and six loans, respectively, with aggregate principal balances totaling approximately $45,610,000 and $20,249,000, respectively, and obtained the properties via the trustee’s sales.

In October 2011 (subsequent to quarter end), the Partnership foreclosed on three first mortgage loans all secured by undeveloped residential and commercial land located in Gypsum, Colorado with an aggregate principal balance of approximately $15,828,000 and obtained the property via the trustee’s sale. It was determined that the fair value of the property was lower than the Partnership’s investments in the loans and a specific loan allowance of approximately $1,053,000 was recorded as of September 30, 2011 which was then recorded as a charge-off against the allowance at the time of foreclosure.

During the nine months ended September 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 and the property was obtained via the trustee’s sale. In addition, during the nine months ended September 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).