Note 4 - Investment in Limited Partnership and Limited Liability Company

3 Months Ended

Jun. 30, 2011

Equity Method Investments Disclosure [Text Block]

4. Investment in Limited Partnership and Limited Liability Company

The Company has a non-controlling, unconsolidated limited partnership interest in an entity that is accounted for using the equity method of accounting.  Capital contributions, distributions, and profits and losses of the entity are allocated in accordance with the terms of the limited partnership agreement. The Company owns effectively 100% of the equity of the limited partnership, but has no decision-making powers, and therefore does not consolidate the limited partnership. Our maximum exposure to loss in this variable interest entity is $14.8 million at June 30, 2011. During the third and fourth quarters of 2010, HC invested, in exchange for limited partnership interests, $19.4 million in this limited partnership that was formed for the purpose of acquiring, servicing, selling or otherwise disposing of first-lien residential mortgage loans.  The pool of mortgage loans was acquired by the partnership at a significant discount to the loans’ unpaid principal balance.

At June 30, 2011, the Company had an investment in this limited partnership of $15.0 million.  For the three and six months ended June 30, 2011, the Company recognized income from the investment in limited partnership of $0.4 million and $1.2 million, respectively.

The condensed balance sheet of the investment in limited partnership at June 30, 2011 and December 31, 2010, respectively, is as follows (dollar amounts in thousands):

Assets	June 30, 2011		December 31, 2010
Cash	$	1,463	$	152
Mortgage loans held for sale (net)		13,053		18,072
Other assets		465		478
Total Assets	$	14,981	$	18,702
Liabilities & Partners’ Equity
Other liabilities	$	162	$	37
Partners’ equity		14,819		18,665
Total Liabilities and Partners’ Equity	$	14,981	$	18,702

The condensed statement of operations of the investment in limited partnership for the three and six months ended June 30, 2011, respectively, is as follows (dollar amounts in thousands):

	Three Months Ended			Six Months Ended
Statement of Operations	June 30, 2011			June 30, 2011
Interest income	$	353		$	761
Realized gain		179			785
Total Income		532			1,546
Other expenses		(85	)		(315	)
Net Income	$	447		$	1,231

During the second quarter of 2011, RBCM invested $5.3 million in a limited liability company that was formed for the purpose of investing in two tranches of securities. For the six months ended June 30, 2011, the Company recognized income from the investment in limited liability company of $33,000.