4.    Mortgages Receivable

Mortgages Receivable

The Company offers secured, non-bank 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 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 quarters ended March 31, 2020 and 2019, the aggregate amounts of loans funded by the Company were $28,675,048 and $12,827,043, respectively, offset by principal repayments of $11,758,497 and $8,481,663, respectively.

At March 31, 2020, the Company’s portfolio included loans with outstanding principal balances up to $2,450,000, with stated interest rates ranging from 5.0% to 13.0% and a default interest rate for non-payment of 18%.

At March 31, 2020, no single borrower had loans outstanding representing more than 10% of the total balance of the loans outstanding.

The Company will extend the term of a loan if, at the time of the extension, the loan and the borrower satisfy the Company’s underwriting requirements at the time of the extension. The Company treats a loan extension as a new loan.

Credit Risk

Credit risk profile based on loan activity as of March 31, 2020 and December 31, 2019:

 

 

The following are the maturities of mortgages receivable as of March 31:

 

 

At March 31, 2020, of the 480 mortgage loans in the Company’s portfolio, 13 were the subject of foreclosure proceedings. The aggregate outstanding balances due on these loans as of March 31, 2020, including unpaid principal, accrued but unpaid interest and borrower fees, was approximately $3.1 million. In the case of each of these loans, the Company believes the value of the collateral exceeds the total amount due.