Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination and purchased at the current par value, which approximates fair value. See Note 3 (Manager and Other Related Parties) for a description of loans transferred by executed assignments between the related mortgage funds.

As of December 31, 2021, 51 loans outstanding (representing 98% of the aggregate principal of the company’s loan portfolio) have a loan term of five years or less. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment penalty provision.

As of December 31, 2021, 28 loans outstanding (representing 33% of the aggregate principal balance of the company’s loan portfolio) provide for monthly payments of principal and interest, typically calculated on a 30-year amortization schedule, with the remaining principal due at maturity. The remaining loans provide for monthly payments of interest only, with the principal due at maturity.

In 2021 the company renewed 16 loans with aggregate principal of approximately $22,678,000 (in 2020 the company renewed 20 loans with aggregate principal of approximately $14,144,000), which are not included in the activity shown in the table above. The loans were current and deemed well collateralized at the time they were extended.

The company funds loans with the intent to hold the loans until maturity, although from time to time the company may sell certain loans when the manager determines it to be in the best interest of the company. In 2021 seven loans with aggregate principal of approximately $3,464,000 were sold to unaffiliated third parties, for an amount that approximated the loan balance at the time of sale.

In December 2020, 4 loans with an aggregate principal of $6,122,779 and accrued interest of $28,171 were sold to an unaffiliated third party. After commissions to third parties the company recognized a gain of approximately $87,000. In September 2020, a loan with principal of $480,000, was sold to an unaffiliated third party, for an amount that approximated the loan balance at the time of sale.

Pursuant to California regulatory requirements, borrower payments are deposited into a trust account established by RMC with an independent bank (and are presented on the balance sheet as “Loan payments in trust”). Funds are disbursed to the company as collected which can range from same day for wire transfers and up to two weeks after deposit for checks. Loan payments in trust at December 31, 2021, were disbursed to the company’s account by January 14, 2022. Loan payments in trust at December 31, 2020 were disbursed to the company’s account by January 15, 2021.

Secured loans had the characteristics presented in the following table ($ in thousands).


	December 31,			December 31,
	2021			2020
Number of secured loans		54			82
Secured loans – principal	$	81,097		$	82,275
Secured loans – lowest interest rate (fixed)		6.8	%		6.8	%
Secured loans – highest interest rate (fixed)		10.0	%		10.5	%

Average secured loan – principal	$	1,502		$	1,003
Average principal as percent of total principal		1.9	%		1.2	%
Average principal as percent of members’ capital, net		2.0	%		1.3	%
Average principal as percent of total assets		1.8	%		1.2	%

Largest secured loan – principal	$	6,750		$	6,735
Largest principal as percent of total principal		8.3	%		8.2	%
Largest principal as percent of members’ capital, net		8.8	%		8.5	%
Largest principal as percent of total assets		8.2	%		7.9	%

Smallest secured loan – principal	$	148		$	104
Smallest principal as percent of total principal		0.2	%		0.1	%
Smallest principal as percent of members’ capital, net		0.2	%		0.1	%
Smallest principal as percent of total assets		0.2	%		0.1	%

Number of California counties where security is located		12			14
Largest percentage of principal in one California county		32.1	%		28.2	%

Number of secured loans with prepaid interest		2			—
Prepaid interest	$	643		$	—

As of December 31, 2021, the company’s largest loan with principal of $6,750,000 is secured by a multi-family building located in San Francisco county, bears an interest rate of 7.25% and matures on May 1, 2023.

As of December 31, 2021, the company had no commitments to lend outstanding and had no construction or rehabilitation loans outstanding.

At funding, secured loans had the lien positions in the following table ($ in thousands).


	December 31, 2021								December 31, 2020
	Loans		Principal			Percent			Loans		Principal			Percent
First trust deeds		38	$	69,327			85	%		56	$	61,066			74	%
Second trust deeds		16		11,770			15			26		21,209			26
Total principal, secured loans		54		81,097			100	%		82		82,275			100	%
Liens due other lenders at loan closing				31,338								45,207
Total debt			$	112,435							$	127,482
Appraised property value at loan closing			$	215,683							$	251,970
Percent of total debt to appraised values (LTV) at loan closing(2)				58.0	%							55.6	%

(2)

Based on appraised values and liens due to other lenders at loan closing. The weighted-average loan-to-value (LTV) computation above does not take into account subsequent increases or decreases in property values following the loan closing nor does it include decreases or increases of the amount of senior liens to other lenders.

Secured loans summarized by property type are presented in the following table ($ in thousands).


	December 31, 2021							December 31, 2020
	Loans		Principal		Percent			Loans		Principal		Percent
Single family(3)		25	$	24,236		30	%		47	$	30,298		37	%
Commercial		19		41,923		52			27		43,692		53
Multi-family		9		13,438		16			8		8,285		10
Land		1		1,500		2			—		—		—
Total principal, secured loans		54	$	81,097		100	%		82	$	82,275		100	%

(3)

Single family property type as of December 31, 2021 consists of 7 loans with principal of $4,619,000 that are owner occupied and 18 loans with principal of $19,617,000 that are non-owner occupied. At December 31, 2020, single family property consisted of 8 loans with principal of approximately $5,565,000 that are owner occupied and 39 loans with principal of approximately $24,733,000 that are non-owner occupied.

The distribution of secured loans by counties is presented in the following table ($ in thousands).


	December 31, 2021					December 31, 2020
	Principal		Percent			Principal		Percent
San Francisco Bay Area(4)
Santa Clara	$	26,064		32.1	%	$	23,206		28.2	%
San Francisco		22,919		28.3			11,340		13.8
San Mateo		4,985		6.1			6,878		8.4
Alameda		5,637		7.0			6,791		8.2
Contra Costa		668		0.8			1,094		1.3
Marin		—		—			1,945		2.4
		60,273		74.3			51,254		62.3
Other Northern California
Placer		1,500		1.8			—		0.0
Monterey		—		0.0			1,110		1.4
Tehama		405		0.5			405		0.5
Butte		292		0.4			—		0.0
Sacramento		—		0.0			104		0.1
		2,197		2.7			1,619		2.0
Northern California Total		62,470		77.0			52,873		64.3
Los Angeles & Coastal
Los Angeles		3,621		4.5			11,775		14.3
San Diego		6,043		7.5			10,186		12.4
Orange		8,444		10.4			5,432		6.6
Santa Barbara		—		—			290		0.3
		18,108		22.4			27,683		33.6
Other Southern California
San Bernardino		519		0.6			1,719		2.1
		519		0.6			1,719		2.1
Southern California Total		18,627		23.0			29,402		35.7
Total principal, secured loans	$	81,097		100.0	%	$	82,275		100.0	%

(4)

Includes Silicon Valley

Secured loans scheduled to mature as of December 31, 2021, are presented in the following table ($ in thousands).


	Loans		Principal		Percent
2022		24	$	35,708		44	%
2023		17		32,842		40
2024		3		5,310		7
2025		5		3,741		5
2026		—		—		—
Thereafter		2		1,216		1
Total scheduled maturities		51		78,817		97
Matured as of December 31, 2021		3		2,280		3
Total principal, secured loans		54	$	81,097		100	%

Scheduled maturities are presented based on the most recent in-effect agreement with the borrower, including forbearance agreements. As a result, matured loans at December 31, 2021, for the scheduled maturities table above may differ from the same captions in the tables of delinquencies and payment in arears presented below that do not consider forbearance agreements. For matured loans, the company may continue to accept payments while pursuing collection of principal or while negotiating an extension of the loan’s maturity date.

It is the company’s experience that the timing of future cash receipts from secured loans will differ from scheduled maturities. Loans may be repaid or renewed before, at or after the contractual maturity date.

Secured loans summarized by payment-delinquency status are presented in the following table ($ in thousands).


	December 31, 2021				December 31, 2020
	Loans		Principal		Loans		Principal
Current		47	$	72,116		73	$	74,042
Past Due
30-89 days		4		7,165		1		190
90-179 days		1		930		5		4,757
180 or more days		2		886		3		3,286
Total past due		7		8,981		9		8,233
Total principal, secured loans		54	$	81,097		82	$	82,275

In March 2022, one loan, with principal of approximately $586,000, included in the table above as 180 or more days delinquent at December 31, 2021 was paid in full.

At December 31, 2021 there was one loan with a forbearance agreement in effect with principal of $990,000, included in the table above as 30-89 days delinquent.

At December 31, 2020, there were two loans with forbearance agreements in effect. One loan with principal of $990,000 is included in the table above as 90-179 days past due, and one loan with a principal of $1,200,000 which is included in the table above as 180 or more days past due.

No loan forbearance agreements or other loan payment modifications were made in 2021 or 2020 that would be deemed troubled debt restructurings.

At December 31, 2021 the company had no loan payment modification/workout agreements with borrowers. At December 31, 2020 the company had one loan payment modification/workout agreement with a borrower. The loan, with principal of $190,198 matured on June 1, 2016. The workout agreement was entered into September 2016, whereby the borrower agreed to resume monthly payments. This agreement extended the maturity date through October 1, 2021. In November 2021, the loan was sold to an unaffiliated third party for an amount that approximated the loan value at time of sale.

Non-performing secured loans at December 31, 2021, and 2020, had principal payments in arrears totaling approximately $2,285,000 (7 loans) and $1,578,000 (8 loans), respectively and interest payments in arrears totaling approximately $125,000 and $361,000, respectively. Payments in arrears for non-performing secured loans (i.e., monthly interest and principal payments past due 30 or more days) at December 31, 2021 and 2020, are presented in the following tables ($ in thousands).


	Loans				Principal				Interest(5)
At December 31, 2021	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days (1-3 payments)		1		2	$	1,050	$	1	$	—	$	33	$	1,084
90-179 days (4-6 payments)		1		—		930		—		—		—		930
180 or more days (more than 6 payments)		1		2		300		4		—		92		396
Total past due(6)		3		4	$	2,280	$	5	$	—	$	125	$	2,410

(5)

Interest includes foregone interest of approximately $63,000 on non-accrual loans with monthly payments in arrears. December 2021 interest is due January 1, 2022 and is not included in the payments in arrears at December 31, 2021.

(6)

As of March 2022, one loan included in the table above as 30-89 days past maturity and one loan included in the table above as 180 or more days past due on monthly payments paid in full. Two loans included in the table above as 30-89 days past due on monthly payments, and one loan included in the table above as 180 or more days past due on monthly payments made at least one payment.


	Loans				Principal				Interest(7)
At December 31, 2020	Past maturity		Monthly payments		Past maturity		Monthly payments		Past maturity		Monthly payments		Total payments in arrears
Past due
30-89 days (1-3 payments)		—		1	$	—	$	—	$	—	$	2	$	2
90-179 days (4-6 payments)		1		4		377		1		—		146		524
180 or more days (more than 6 payments)		1		1		1,200		—		105		108		1,413
Total past due(8)		2		6	$	1,577	$	1	$	105	$	256	$	1,939

(7)

Interest includes foregone interest of $42,000 on non-accrual loans past maturity and approximately $21,000 for monthly payments in arrears. December 2020 interest is due January 1, 2021 and is not included in the payments in arrears at December 31, 2020.

(8)

One loan with principal of approximately $137,000, which was 180 or more days past due, paid in full in January 2021 and so was not designated as non-performing at December 31, 2020, and is not included in the table above.

Non-performing loans are placed on non-accrual status the 1st of the following month after it is 180 days delinquent or earlier if management determines that the primary source of repayment will come from the foreclosure and subsequent sale of the collateral securing the loan (which usually occurs when a notice of sale is filed) or when the loan is no longer considered well-secured. When a loan is placed on non-accrual status, the accrual of interest is discontinued for accounting purposes only (i.e., foregone interest in the table above); however, previously recorded interest is not reversed.

At December 31, 2021, there were two loans with aggregate principal of approximately $1,230,000 which were 90 or more days past due and not in non-accrual status.

At December 31, 2020, five loans with aggregate principal of $4,703,296 were 90 days or more days past due and were not in non-accrual status.

Generally, the company has not recorded an allowance for loan losses as all loans have protective equity such that collection is deemed probable for all recorded amounts due on the loan. From time to time, the manager may deem it in the best interest of the company to agree to concessions to borrowers to facilitate a sale of collateral or refinance transactions primarily for secured loans in second lien position.

The following methods and assumptions are used when estimating fair value of secured loans.

Secured loans, performing and non-performing not designated as impaired (Level 3) - Each loan is reviewed quarterly for its delinquency, LTV adjusted for the most recent valuation of the underlying collateral, remaining term to maturity, borrower’s payment history and other factors. Due to the nature of the company’s loans and borrowers, the fair value of loan balances secured by deeds of trust approximates the recorded amount (per the financial statements) due to the following:

Secured loans, designated impaired (Level 3) - The fair value of secured loans designated impaired is the lesser of the fair value of the collateral or the enforceable amount of the note. Secured loans designated impaired are collateral dependent because it is expected that the primary source of repayment will not be from the borrower but rather from the collateral. The fair value of the collateral is determined on a nonrecurring basis by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values and publicly available information on in-market transactions (Level 3 inputs). When the fair value of the collateral exceeds the enforceable amount of the note, the borrower is likely to redeem the note. Accordingly, third party market participants would generally pay the fair value of the collateral, but no more than the enforceable amount of the note.

The following methods and assumptions are used to determine the fair value of the collateral securing a loan.

Single family - Management’s preferred method for determining the fair market value of its single-family residential assets is the sale comparison method. Management primarily obtains sale comps via its subscription to the RealQuest service, but also uses free online services such as Zillow.com and other available resources to supplement this data. Sale comps are reviewed and adjusted for similarity to the subject property, examining features such as proximity to subject, number of bedrooms and bathrooms, square footage, sale date, condition and year built.

If applicable sale comps are not available or deemed unreliable, management will seek additional information in the form of brokers’ opinions of value or appraisals.

Multi-family residential - Management’s preferred method for determining the aggregate retail value of its multifamily units is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in multi-family residential properties. Sales comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units by the number of bedrooms and bathrooms, square footage, condition, amenities and year built.

Management’s secondary method for valuing its multifamily assets as income-producing rental operations is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to published data from reliable third-party sources such as the CBRE Cap Rate Survey. Management applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing project. When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial - Management’s preferred method for determining the fair value of its commercial buildings is the sale comparison method. Sale comps are typically provided in appraisals, or by realtors who specialize in commercial properties. Sale comps are reviewed for similarity to the subject property, examining features such as proximity to subject, rental income, number of units, composition of units, common areas, and year built.

Management’s secondary method for valuing its commercial buildings is the direct capitalization method. In order to determine market cap rates for properties of the same class and location as the subject, management refers to reputable third-party sources such as the CBRE Cap Rate Survey. Management then applies the appropriate cap rate to the subject’s most recent available annual net operating income to determine the property’s value as an income-producing commercial rental project.

When adequate sale comps are not available or reliable net operating income information is not available or the project is under development or is under-performing to market, management will seek additional information and analysis to determine the cost to improve and the intrinsic fair value and/or management will seek additional information in the form of brokers’ opinion of value or appraisals.

Commercial land - Commercial land has many variations/uses, thus requiring management to employ a variety of methods depending upon the unique characteristics of the subject land, including a determination of its highest and best use. Management may rely on information in the form of a sale comparison analysis (where adequate sale comps are available), brokers’ opinion of value, or appraisal.