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NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES
6 Months Ended
Jun. 30, 2016
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES  
NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

NOTE 3. NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

 

Notes and interest receivable from related parties is comprised of junior mortgage loans, which are loans secured by mortgages that are subordinate to one or more prior liens on the underlying real estate. Recourse on the loans ordinarily includes the real estate which secures the loan, other collateral and personal guarantees of the borrower.

 

All of the Company’s notes receivable are with Unified Housing Foundation, Inc. (“UHF”). UHF is determined to be a related party to the Company due to our significant investment in the performance of the collateral secured under the notes receivable. Payments are due from surplus cash flow from operations, sale or refinancing of the underlying properties. These notes are cross collateralized to the extent that any surplus cash available from any of the properties underlying these notes will be used to repay outstanding interest and principal for the remaining notes. Furthermore, any surplus cash available from any of the properties UHF owns, besides the properties underlying these notes, can be used to repay outstanding interest and principal for these notes. The allowance on the notes was a purchase allowance that was netted against the notes when acquired.

 

At June 30, 2016, we had mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $23.8 million. As of June 30, 2016, we recognized interest income of $1.8 million related to these notes receivable. Below is a summary of notes and interest receivable from related parties (dollars in thousands):

 

Borrower  Maturity
Date
  Interest
Rate
  Amount  Collateral
Performing loans:                    
Unified Housing Foundation, Inc. (Echo Station)   12/32    12.00%  $1,481    Secured 
Unified Housing Foundation, Inc. (Lakeshore Villas)   12/32    12.00%   2,000    Secured 
Unified Housing Foundation, Inc. (Lakeshore Villas)   12/32    12.00%   6,368    Secured 
Unified Housing Foundation, Inc. (Limestone Canyon)   12/32    12.00%   2,653    Secured 
Unified Housing Foundation, Inc. (Limestone Ranch)   12/32    12.00%   1,953    Secured 
Unified Housing Foundation, Inc. (Parkside Crossing)   12/32    12.00%   1,936    Secured 
Unified Housing Foundation, Inc. (Sendero Ridge)   12/32    12.00%   4,491    Secured 
Unified Housing Foundation, Inc. (Timbers of Terrell)   12/32    12.00%   1,323    Secured 
Unified Housing Foundation, Inc. (Tivoli)   12/32    12.00%   1,826    Secured 
Accrued interest             1,558      
Total Performing            $25,589      
                     
Allowance for doubtful accounts             (1,826)     
Total            $23,763      

 

All are related party notes.