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NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES
 12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
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.

 

The Company has various notes receivable from Unified Housing foundation, Inc. “UHF”. UHF is determined to be a related party due to our significant investment in the performance of the collateral secured under the notes receivable. 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.

 

All of the Company’s notes receivable are with UHF. 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%.

 

At December 31, 2018 and 2017, we had mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $14.0 million. As of December 31, 2018 and 2017, we recognized interest income of $1.8 million and $2.3 million, respectively, related to these notes receivable. Below is a summary of notes and interest receivable from related parties (dollars in thousands):

 

      Maturity       Interest                  
Borrower     Date       Rate     Amount     Collateral    
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       Secured  
Unified Housing Foundation, Inc. (Lakeshore Villas)     12/32       12.00 %     6,369       Secured  
Unified Housing Foundation, Inc. (Limestone Ranch)     12/32       12.00 %     1,953       Secured  
Unified Housing Foundation, Inc. (Timbers of Terrell)     12/32       12.00 %     1,323       Secured  
Accrued interest                     904          
Total Performing                   $ 14,030          

 

All are related party notes.