NOTE 2 - MORTGAGES PAYABLE AND INTEREST CREDIT SUBSIDY - FEDERAL FUNDS: On July 1, 2015, the Project entered into a first mortgage through Rural Development in the amount of $771,910; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $1,635. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2025, and 2024 was $768,220, with accrued interest of $131,625 and $119,975, respectively. Payments are deferred and payable after a 20-year period. On July 1, 2015, the Project entered into a second mortgage through Rural Development in the amount of $85,119; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $180. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2025, and 2024 was $84,712, with accrued interest of $14,514 and $13,229, respectively. Payments are deferred and payable after a 20-year period. On October 24, 2016, the Project entered into a third mortgage through Rural Development in the amount of $276,989, for the purpose of rehabilitating the Project; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $602. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2025, and 2024 was $252,815 and $255,976, respectively. On February 27, 2017, the Project entered into a construction loan through Rural Development in the amount of $289,891, for the purpose of rehabilitating the Project; interest at 1%. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2025, and 2024 was $289,841 and $289,891, respectively, with accrued interest of $21,163 and $18,948, respectively. Payments are deferred and payable after a 20-year period. As summarized above, the mortgages’ total outstanding principal balance as of October 1, 2024, was $1,398,799, which represents the highest loan balance during the year reported in accordance with the standards of the Uniform Guidance. During the year ended September 30, 2025, the Project received interest credit subsidies totaling $19,246 in accordance with its agreements with RD. These subsidies represent the difference between the interest payments calculated at the contractual note rates of these mortgages (ranging from 3.125% to 3.625%) and the subsidized interest rate of 1%, effectively reducing the Project's required monthly debt service payments. The loans receiving interest credit subsidies include Loan 008 with a note rate payment of $2,788 and a subsidized payment of $1,635, Loan 009 with a note rate payment of $307 and a subsidized payment of $180, and Loan 003 with a note rate payment of $926 and a subsidized payment of $602. The total annual interest credit subsidy is calculated as the difference between the contractual monthly payments and the subsidized monthly payments.
Subsidy revenue for eligible tenants is provided under a RD housing assistance payment contract. This contract requires tenants to contribute a portion of the contract rent based on formulas prescribed by RD. The difference between the calculated tenant rent and the contract rent is paid by RD. The Project earned rental assistance of $66,004 (31% of total revenue) in 2025.