United Development Funding IV fka UDFI

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If you read through the last 10Q, you’ll notice many second loans secured by both a pledge of equity int he project and ‘reimbursements.’

Reimbursements are solid collateral, but they take time to turn into cash.

In Texas, many developments are financed by MUD bonds. These are Municipal Utility Districts and allow for a developer to receive reimbursement of development costs. As long as the development is viable, the reimbursements are significant.

And, given the current state of the housing market, almost all developments are now viable.

There is real collateral behind these loans given the dramatic rise in land values. It’s another factor to support a good loan value. These reimbursements take years to materialize but they are real collateral.