Mortgages Receivable |
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loans on Real Estate [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Mortgage Loans on Real Estate, by Loan Disclosure [Text Block] |
3. Mortgages Receivable
Mortgages Receivable
The Company offers secured non-banking loans to real estate investors (also known as “hard money” loans) to fund their acquisition and construction of properties located mainly in Connecticut. The loans are principally secured by first mortgages on one or more properties owned by the borrower or related parties. In addition, each loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well. The loans are generally for a term of one to three years. The loans are initially recorded and carried thereafter, in the financial statements, at cost. Most of the loans provide for monthly payments of interest only (in arrears) during the term of the loan and a “balloon” payment of the principal on the maturity date. For the years ended December 31, 2017 and 2016, the aggregate amounts of loans funded by the Company were $53,468,949 and $21,580,103 respectively, offset by principal repayments of $23,948,661 and $14,861,360 respectively. As of December 31, 2017, the Company’s portfolio included closed loans ranging in size from $16,900 to $1,662,000 with stated interest rates ranging from 9.5% to 12% and a default interest rate for non-payment of 18%. At December 31, 2017 and 2016, no single borrower had loans outstanding representing more than 10% of the total balance of the loans outstanding. The Company generally grants loans for a term of one to three years. In some cases, the Company has agreed to extend the term of the loans. A loan that is extended is treated as a new loan. However, prior to granting an extension, the loan underwriting process is repeated. In November 2016, the Company purchased a mortgage note at a discount of $74,954 and then subsequently refinanced the note obtaining additional collateral and payment terms consistent with similar notes held by the Company. The discount is being amortized over the three-year life of the refinanced loan. Credit Risk
Credit risk profile based on loan activity as of December 31, 2017 and 2016:
As of December 31, 2017, the following is the maturities of mortgages receivable for the years ending December 31:
At December 31, 2017, of the 337 mortgage loans in the Company’s portfolio, 12 were treated by the Company as “non-performing”, typically because the borrower is more than 90 days in arrears on its interest payment obligations or because the borrower has failed to make timely payments of real estate taxes or insurance premiums. The aggregate outstanding principal balance of these non-performing loans and the accrued but unpaid interest as of December 31, 2017 was approximately $2.2 million. The non-performing loans have all been referred to counsel to commence foreclosure proceedings or to negotiate settlement terms. In the case of each non-performing loan, the Company believes the value of the collateral exceeds the outstanding balance on the loan.
At December 31, 2016, of the 217 mortgage loans in the Company’s portfolio, five were treated by the Company as non-performing. The aggregate outstanding principal balance of these non-performing loans and the accrued but unpaid interest as of December 31, 2016 was approximately $532,000. By the end of 2017, the Company had settled all five loans by accepting deeds-in-lieu of foreclosure. Three of the properties were sold in 2016 and one was sold in 2017. The Company had a net aggregate loss on the sale of the four properties of approximately $88,000. The fifth property is held for rental.
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