3.    Mortgage Loans Receivable ; Due from Borrowers

The Company offers secured, non-banking loans to real estate owners and investors (also known as "hard money" loans) to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in Connecticut. The loans are secured by first mortgage liens on one or more properties owned by the borrower or related parties. In addition, each mortgage loan is personally guaranteed by the borrower or its principals, which guarantees may be collaterally secured as well. The mortgage loans are generally for a term of one to three years. The mortgage loans are initially recorded and carried thereafter, in the financial statements, at cost. Most of the mortgage 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 three-month periods ended June 30, 2019 and 2018, the aggregate amounts of mortgage loans funded by the Company were $15,689,085 and $19,917,555, respectively, offset by principal repayments of $12,616,803 and $12,948,055, respectively. For the six-month periods ended June 30, 2019 and 2018, the aggregate amounts of loans funded by the Company were $28,516,128 and $30,263,339, respectively, offset by principal repayments of $21,098,466 and $18,982,298, respectively.

At June 30, 2019, the Company’s mortgage loan portfolio included loans ranging in size from approximately $7,000 to $2,300,000 with stated interest rates ranging from 5.0% to 13.0% and a default interest rate for non-payment of 18%.

At June 30, 2019, no single borrower , or affiliated group of borrowers, accounted for more than 10% of the total outstanding balance of the Company’s mortgage loan portfolio.

At the request of the borrower, the Company may extend the term of a mortgage loan provided the loan satisfies the Company’s underwriting requirements at the time of the extension.  A mortgage loan that is extended is treated as a new loan and the borrower is required to pay all fees associated with the funding of a new loan, including origination fees.

Credit Risk

Credit risk profile of the Company’s mortgage loan portfolio as of June 30, 2019 and December 31, 2018 is as follows:

 

 

The following are the maturities of mortgage loans receivable as of June 30:

 

 

At June 30, 2019, of the 414 mortgage loans in the Company’s mortgage loan portfolio, eight were referred to counsel for collection and are currently the subject of foreclosure proceedings. The aggregate outstanding principal balance of these mortgage loans and the accrued but unpaid interest as of June 30, 2019 was approximately $2.9 million. In addition, there are fourteen mortgage loans in default because the borrower has failed to make monthly interest payments, pay real estate taxes and insurance or failed to comply with covenants contained in the loan documents. The aggregate outstanding principal balance of these fourteen mortgage loans and the accrued but unpaid interest as of June 30, 2019 was approximately $5.8 million. In comparison, at June 30, 2018, of the 385 mortgage loans in the Company’s portfolio, eight were referred to counsel for collection and were the subject of foreclosure proceedings. The aggregate outstanding principal balance of these eight mortgage loans and the accrued but unpaid interest as of June 30, 2018 was approximately $2.56 million. In the case of each of these loans, at June 30, 2019 and 2018, the Company believes that the value of the collateral exceeds the outstanding balance on such loan.

 

From time-to-time, the Company may advance funds to a borrower in connection with the ownership operation or renovation of the subject property or pay certain expenses on behalf of the borrower, such as real estate taxes or insurance premiums. These advances are not included in “mortgages receivable” but are designated as “due from borrowers” and are due and payable upon maturity of the related mortgage loan. The Company believes these amounts are collectable.