NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES

12 Months Ended

Dec. 31, 2015

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. As of January 1, 2013, the Company agreed to extend the maturity on the notes receivable from UHF for an additional term of five years for the early termination of the preferred interest rate period. The original notes gave a five-year period of preferred interest rate at 5.25%, before returning to the original note rate of 12.0%. The notes mature in December 2032 and have interest rates of 12.0%.

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 December 2015 and 2014, notes and interest receivable from related parties, net of allowances, totaled $24.9 million and $25.6 million, respectively. As of December 31, 2015 and 2014, we recognized interest income of $2.7 million and $3.0 million, respectively, related to these notes. Below is a summary of notes and interest receivable from related parties (dollars in thousands):

Borrower	Maturity Date		Interest Rate			Amount			Security
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		Unsecured
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							2,677
Total Performing						$	26,708
Allowance for estimated losses							(1,826	)
Total						$	24,882

All are related party notes.