Real Estate Assets, Net

6 Months Ended

Jun. 30, 2021

The Company acquires real estate assets either through direct purchases of properties for its rental portfolio or through conversions of mortgage loans in its portfolio such as when a mortgage loan is foreclosed upon and the Company takes title to the property on the foreclosure date or the borrower surrenders the deed in lieu of foreclosure.

Property Held-for-Sale and Rental Property

The Company's REO property consists of property held-for-sale and rental property. REO property is considered held-for-sale if the REO is expected to be actively marketed for sale. As of June 30, 2021 and December 31, 2020, the Company’s net investments in real estate owned properties were $4.8 million and $8.5 million, respectively, which included balances relating to properties held-for-sale of $4.4 million and $7.8 million, respectively, and rental properties of $0.4 million and $0.7 million, respectively. Also, included in the properties held-for-sale balance for both periods as of June 30, 2021 and December 31, 2020, was $0.3 million for properties undergoing renovation or which are otherwise in the process of being brought to market. As of June 30, 2021 and December 31, 2020, the Company had a total of 25 and 38 real estate owned properties, respectively, which included 20 and 32 held-for-sale properties, respectively, and five and six rental properties, respectively. For the six months ended June 30, 2021 and 2020, all of the additions to REO held-for-sale were acquired through foreclosure or deed in lieu of foreclosure, and reclassified out of the mortgage loan portfolio and transfers from rental properties.

The following table presents the activity in the Company’s carrying value of property held-for-sale and rental property for the three and six months ended June 30, 2021 and 2020 ($ in thousands):


	Three months ended June 30,						Six months ended June 30,
	2021			2020			2021			2020
Property Held-for-sale and Rental Property	Count	Amount		Count	Amount		Count	Amount		Count	Amount
Balance at beginning of period	31	$	7,098	54	$	12,250	38	$	8,526	68	$	15,071
Net transfers from mortgage loans	5	1,046		2	98		7	1,274		7	912
Adjustments to record at lower of cost or fair value	—	(77)		—	(103)		—	(248)		—	(1,000)
Depreciation on rental properties	—	(3)		—	(8)		—	(6)		—	(16)
Disposals	(11)	(3,296)		(14)	(3,997)		(20)	(4,778)		(33)	(6,727)
Other	—	—		—	(7)		—	—		—	(7)
Balance at end of period	25	$	4,768	42	$	8,233	25	$	4,768	42	$	8,233

Dispositions

During the three and six months ended June 30, 2021, the Company sold 11 and 20 REO properties, respectively, realizing net gains of approximately $0.1 million and $0.2 million, respectively. Comparatively, for the three and six months ended June 30, 2020, the Company sold 14 and 33 REO properties, respectively, realizing net gains of approximately $0.4 million and $0.8 million, respectively. These amounts are included in Other income on the Company's consolidated statements of income. The Company recorded lower of cost or net realizable value adjustments in Real estate operating expense for the three and six months ended June 30, 2021 of $0.1 million and $0.2 million, respectively. Comparatively, for the three and six

months ended June 30, 2020, the Company recorded lower of cost or net realizable value adjustments of $0.1 million and $1.0 million, respectively.