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NOTES AND INTEREST RECEIVABLE FROM RELATED PARTIES
 12 Months Ended
Dec. 31, 2020
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. The notes mature in December 2032 and have interest rates of 12.0%.

 

During 2020, the Company collected $808 thousand on a fully reserved note receivable and the full amount of the collection is included in other income. In February 2021, the Company collected the remaining balance due of $1.1 million which is the remaining balance of the fully reserved note receivable. In addition, in February 2021, the Company collected $1.9 million of principal and $.6 million of accrued interest on the UHF notes receivable listed below. These funds were transferred to the IOR parent (TCI) under company policy.

 

At December 31, 2020 and 2019, we had mortgage loans and accrued interest receivable from related parties, net of allowances, totaling $13.9 million. As of December 31, 2020 and 2019, 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):

 

   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 
        Total Notes Receivable            13,126      
Accrued interest            804      
Total Performing           $13,930      

 

All are related party notes.