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. All 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 nine-month periods ended September 30, 2020 and 2019, the aggregate amounts of loans funded by the Company were $68,029,798 and $42,163,704, respectively, offset by principal repayments of $37,859,270 and $27,917,331, respectively.

At September 30, 2020, the Company’s portfolio included loans with outstanding principal balances up to approximately $3.2 million, with stated interest rates ranging from 5.0% to 13.0% and a default interest rate for non-payment of 18%.

At September 30, 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 September 30, 2020 and December 31, 2019:

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The following are the maturities of mortgages receivable as of September 30:

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At September 30, 2020, the Company’s mortgage loan portfolio included 480 mortgage loans, of which fourteen were the subject of foreclosure proceedings. The aggregate outstanding balances due on these fourteen loans as of September 30, 2020, including unpaid principal, accrued but unpaid interest and borrower fees, was approximately $4.0 million. In the case of each of these loans, the Company believes the value of the collateral exceeds the total amount due.

In the second quarter of 2020, the Company restructured twenty-three loans, having an aggregate balance of $6.5 million at June 30, 2020, pursuant to forbearance requests by borrowers under a program the Company adopted in response to the COVID-19 pandemic. The total amount of interest deferred under these twenty-three loans was approximately $200,000. At September 30, 2020, eighteen of the original twenty-three forbearance loans, having an aggregate principal balance of $5.1 million and $146,000 of deferred interest, were still outstanding. Once a forbearance request is initiated by the borrower, the Company requests documentation to determine the validity of the request and if deemed valid and reasonable, the Company defers the borrower's payment of interest for a period of 90 days. A legal fee is the only charge passed on to the borrower. To qualify for forbearance, a borrower must be current on all its obligations to the Company.