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NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES
 12 Months Ended
Dec. 31, 2019
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, 2019 and 2018, we had mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $14.0 million. As of December 31, 2019 and 2018, we recognized interest income of $1.8 million each year, related to these notes receivable. Below is a summary of notes and interest receivable from related parties (dollars in thousands):

 

Borrower   Maturity
Date		   Interest
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
Total Notes Receivable             13,126    
Accrued interest             904    
Total Performing           $ 14,030    
                   
All are related party notes.