Note 3 - Mortgage Note Receivable

6 Months Ended

Jun. 30, 2013

Notes

Note 3 - Mortgage Note Receivable

Note 3 – Mortgage Note Receivable

On May 30, 2006, the Partnership purchased the second mortgage for a Local Partnership, Michigan Beach, from the second mortgage holder, PAMI Midatlantic, LLC (“PAMI”) for a purchase price of $4,320,000. The second mortgage had a principal balance of approximately $3,596,000 and accrued interest outstanding at the time of the purchase. PAMI had filed an action for foreclosure and the appointment of a receivor for the alleged failure to make surplus cash payments and provide required financial reporting. As a result of the purchase, the Partnership was substituted in place of PAMI in the foreclosure action and then the Partnership dismissed the foreclosure action with prejudice on June 9, 2006. The Partnership is the sole limited partner in Michigan Beach.

The second mortgage accrues interest at a fixed rate of 6.11%.  Semiannual payments from 50% of surplus cash are required and the note matures in July, 2031.  There is an option to the noteholder to accelerate maturity of the second mortgage after October, 2008. There have been no payments made on the loan. The Partnership recognized approximately $55,000 and $98,000  in equity in loss from Michigan Beach during the six months ended June 30, 2013 and 2012, respectively, and reduced the carrying value of the mortgage note receivable. With respect to the second mortgage from Michigan Beach, the Partnership has fully reserved any accrued interest.

The following is a summary of the mortgage note receivable activity for the six months ended June 30, 2013 (in thousands):

	Six Months Ended June 30, 2013
Mortgage note receivable balance, beginning of period	$ 3,533
Equity in losses of Local Partnership	(55)
Mortgage note receivable balance, end of period	$ 3,478