UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark one)

For the Year Ended December 31, 20172020

For the transition period from                      to                     

Commission file number: 000-27816

REDWOOD MORTGAGE INVESTORS VIII,

a California Limited Partnership

(Exact name of registrant as specified in its charter)

(650) 365-5341

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    ☐  YES    ☒  NO

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    ☐  YES    ☒  NO

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  YES    ☐  NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  YES    ☐  NO

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

If an emerging growth company, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange  Act).    ☐  YES    ☒  NO

The registrant’s limited partnership units are not publicly traded and therefore have no market value.

The registrant had 147,329,04382,546,227 limited partnership interests outstanding as of February 28, 2018.2021.

REDWOOD MORTGAGE INVESTORS VIII

(A California Limited Partnership)

Index to Form 10-K

December 31, 20172020

i

Forward-Looking Statements

Certain statements in this Report on Form 10-K which are not historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), including statements regarding the partnership’s expectations, hopes, intentions, beliefs and strategies regarding the future. Forward-looking statements, which are based on various assumptions (some of which are beyond our control), may be identified by reference to a future period or periods or by use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” “possible” or similar terms or variations on those terms or the negative of those terms.  Forward-looking statements include statements regarding trends in the California real estate market, future interest rates and economic conditions and their effect on the partnership and its assets, estimates as to the allowance for loan losses, estimates of future redemptionswithdrawals of units, future funding of loans by the partnership, and beliefs relating to how the partnership will be affected by current economic conditions and trends in the financial and credit markets.  Actual results may be materially different from what is projected by such forward-looking statements.  Factors that might cause such a difference include, but are not limited to, the following:

All forward-looking statements and reasons why results may differ included in this Form 10-K are made as of the date hereof, and we assume no obligation to update any such forward-looking statement or reason why actual results may differ.

Part I

Item 1 – Business

Redwood Mortgage Investors VIII, a California Limited Partnership (we, RMI VIII(“we”, “RMI VIII” or the partnership)“partnership”), was formed in 1993 to engage in business as a mortgage lender and investor by making and holding-for-investment mortgage loans secured by California real estate, primarily by first and second deeds of trust.

The ongoing sources of funds for loans are the proceeds (net of withdrawals from partner capital accounts, subject to limitations) from

We are externally managed by Redwood Mortgage Corp., a general partner (RMC(“RMC” or the manager)“manager”). The general partners are RMC and Michael R. Burwell (“Burwell”), an individual. The manager is solely responsible for managing the business and affairs of the partnership, subject to the voting rights of the partners on specified matters. The manager acting alone has the power and authority to act for and bind the partnership. RMC provides the personnel and services necessary to conduct our business as we havethe partnership has no employees of ourits own.

The mortgage loans we fundthe partnership funds and/or investinvests in are arranged and generally are serviced by RMC.

The general partner is required to contribute to capital one tenth of one percent (0.1%)rights, duties, and powers of the aggregate capital accountslimited partners and general partners of the members.partnership are governed by the Limited Partnership Agreement (“Partnership Agreement”). Limited partners should refer to the Partnership Agreement for complete disclosure of its provisions.

Limited partners representing a majority of the outstanding units may, without the consent of the general partners, vote to:

A majority in interest of partnership units is required to elect a new general partner to continue the partnership business after a general partner ceases to be a general partner due to its withdrawal.

ProfitsThe following is a summary of certain provisions of the Partnership Agreement and lossesis qualified in its entirety by the terms of the agreement itself.

The ongoing sources of funds for loans are the proceeds (net of withdrawals from partner capital accounts, subject to limitations) from:

The partnership intends to hold until maturity the loans in which it invests and does not presently intend to invest in mortgage loans primarily for the purpose of reselling such loans in the ordinary course of business; however, the partnership may sell mortgage loans (or fractional interests therein) when the manager determines that it appears to be advantageous for the partnership to do so, based upon then current interest rates, the length of time that the loan has been held by the partnership, the partnership’s credit risk and concentration risk and the overall investment objectives of the partnership. Loans sold to third parties may be sold for par, at a premium or, in the case of non-performing or under performing loans, at a discount. Partnership loans may be sold to third parties or to the manager or its related mortgage funds; however, any loan sold to the manager or related mortgage fund will be sold for a purchase price equal to the greater of (i) the par value of the loan or (ii) the fair market value of the loan. The manager will not receive commissions or broker fees with respect to loan sales conducted for the partnership; however, selling loans will increase limited partners’ capital available for investing in new loans for which the manager will earn brokerage fees and other forms of compensation.

Income or loss is allocated among the limited partners according to their respective capital accounts after one percent (1%) of profits and losses areincome or loss is allocated to the general partners. Beginning in 2010, and continuing until December 31, 2019, RMC assigned its right to two-thirds of one percent (0.66%) of income or loss to Burwell in exchange for Burwell assuming one hundred percent (100%) of the general partners’ equity deficit. This agreement expired January 1, 2020 and was not extended.  The monthly results are subject to subsequent adjustment as a result of quarterly and year-end accounting and reporting. Investors should not expect the partnership to provide tax benefits of the type commonly associated with limited liability partnership tax shelter investments. Federal and state income taxes are the obligation of the partners, other than the annual California franchise tax and any California LLC cash receipts taxes paid by the partnership’s subsidiaries.

Distribution policyThe partnership’s net income, cash available for distribution, and net-distribution rate fluctuates depending on:

Distributions to limited partners

At the time of their subscription for units,to the partnership, limited partners electelected either to have distributed to them theirreceive monthly, quarterly or annual allocation of profits,cash distributions from the partnership, or to have profits allocated tocompound income in their capital accountsaccount. If an investor initially elected to receive monthly, quarterly or annual distributions, such election, once made, is irrevocable. If the investor initially elected to compound income in their capital account, in lieu of cash distributions, the investor may, after three (3) years, change the election and receive monthly, quarterly or annual cash distributions. Income allocable to limited partners who elect to compound income in their capital account will be retained by the partnership for making further loans or for other proper partnership purposes and such amounts will be added to compound. Subject to certain limitations, those electing compounding may subsequently change their election. A partner’s election to receive cash distributions is irrevocable.such limited partners’ capital accounts.

Liquidity, capitalCapital withdrawals and early withdrawals

Because thereThere are substantial restrictions on transferability of units, and there is no established public trading and/or secondary market for the units, and none is expected to develop.units. To provide liquidity to limited partners, the partnership agreement provides that limited partners, after the minimum five-year period, may withdraw all or a portion of their capital accounts in 20 quarterly installments or longer, as determined by the general partners in light of partnership cash flow, beginning the last day of the calendar quarter following the quarter in which the notice of withdrawal is given.  A limited partner may liquidate all or a part of the limited partner’s capital account in four quarterly installments beginning on the last day of the calendar quarter following the quarter in which the notice of withdrawal is given, subject to a 10% early withdrawal penalty applicable to any sums withdrawn prior to the time when such sums could have been withdrawn without penalty. There is also a limited right of accelerated liquidation for an investor’s heirs upon an investor’s death.

We haveThe partnership has not established a cash reserve from which to fund withdrawals and, accordingly, ourthe partnership’s capacity to return a limited partner’s capital is subject to the availability of partnership cash. NoThe general partner is under no obligation to sell loans from the portfolio in order to honor withdrawals requests, and the program can be restricted or suspended at any time. Cash flow is considered to be available only after all current partnership expenses have been paid (including compensation to the general partners) and adequate provision has been made for the payment of all periodic cash distributions on a pro rata basis which must be paid to limited partners who elected to receive such distributions upon subscription for units. Per the Limited Partnership Agreement, no more than 20% of the total limited partners’ capital account balances at the beginning of any year may be liquidated during any calendar year. Notwithstanding this 20%, the general partners shall have the discretion to further limit the percentage of total limited partners’ capital accounts that may be withdrawn in order to comply with the safe harbor provisions of the regulations under Section 7704 of the Internal Revenue Code of 1986, as amended, to avoid the partnership being taxed as a corporation. If notices of withdrawal in excess of these limitations are received by the general partners, the priority of distributions among limited partners shall be determined as follows: first to those limited partners withdrawing capital accounts according to the 20 quarter or longer installment liquidation period, then to benefit plan investors withdrawing capital accounts after five years over four quarterly installments, then to executors, heirs, and other administrators withdrawing capital accounts upon the death of a limited partner and finally to all other limited partners withdrawing capital accounts. Except as provided above, withdrawal requests will be considered by the general partners in the order received.

See the table in “Capital withdrawals” under Item 5 - Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in Part II of this annual report for a detailed table showing the amount of capital withdrawals, which table is incorporated by this reference into this Item 1.

Investment objectives and lending guidelines

OurThe partnership’s primary investment objectives are to:

WeThe partnership generally fundfunds loans:

The partnership’s loans generally have shorter maturity termsmaturities than typical mortgages. AsIn the event that a result, constraints on the ability of our borrowers to refinance their loansloan is performing, and collection is deemed probable at maturity, possibly would have a negative impact on their abilitythe partnership may elect to repay their loans.extend the loan’s maturity. In the event a loan is not performing and the borrower is unable to repay atin full the principal on the loan by the maturity date, the partnership may consider extendingelect to modify the term through a loan modificationpayment terms and designate the loan as impaired or foreclosingit may foreclose on the property. A reduction in loan repayments would reduce the partnership’s cash flows and restrict the partnership’s ability to invest in new loans and/or, if ongoing for an extended period, provide earnings distributions and redemptions of partners’ capital.loan.

Generally, interest rates on our mortgage loans are higher than conventional mortgage loans and have not been affected directly by market movements in interest rates. If, as expected, we continuethe partnership continues to make and invest in fixed rate loans primarily, and interest rates were to rise, a possible result would be lower prepayments of ourthe partnership’s loans. This increase in the duration of the time loans are on the books may reduce overall liquidity of the partnership’s loan portfolio, which itself may reduce our investment intothe partnership’s ability to invest in new loans at higher interest rates. Conversely, if interest rates were to decline, wethe partnership could see a significant increase in borrower prepayments. If wethe partnership then investinvests in new loans at lower rates of interest, a lower yield to partners may possibly result.

The cash flow and the income generated by the real property securing the loan factor into the credit decisions, as does the general creditworthiness, experience and reputation of the borrower. However, for loans secured by real property, other than owner-occupied personal residences, such considerations are subordinate to a determination that the value of the real property is sufficient, in and of itself, as a source of repayment. The amount of the loan combined with the outstanding debt and claims secured by a senior deed of trust on the real property generally will not exceed a specified percentage of the appraised value of the property (the loan-to-value ratio,(“the loan-to-value ratio”, or LTV) “LTV”) as determined by an independent written appraisal at the time the loan is made. The LTV generally will not exceed 80% for residential properties (including multi-family), 75% for commercial properties, and 50% for land. The excess of the value of the collateral securing the loan over our debtthe partnership’s secured loan and any senior debt owingand/or claims on the property is the “protective equity.”

We believe ourThe partnership believes its LTV policy gives usprovides more potential protective equity than competing lenders who fund loans with a higher LTV. However, wethe partnership may be viewed as an “asset” lender based on ourits emphasis on LTV in ourits underwriting process. Being an “asset” lender may increase the likelihood of payment defaults by borrowers. Accordingly, wethe partnership may have a higher level of payment delinquency and loans designated as impaired for financial reporting purposes than that of lenders, such as banks and other financial institutions subject to federal and state banking regulations, which are typically viewed as “credit” lenders.

See Results of Operations, Secured Loans included in Part II, Item 7 and Note 4 (Loans) to the financial statements included in Part II, Item 8 of this report for a detailed presentation on our secured loan portfolio and on the allowance for loan losses, which presentation is incorporated by this reference into this Item 1.losses.

Competition

The San Francisco Bay Area, including the South Bay/Silicon Valley, and the Los Angeles metropolitan area are our most significant locations of lending activity and theactivity. The economic vitality of these regions – as well as the stability of the national economy and the financial markets – is of primary importance in determining the availability of new lending opportunities and the performance of previously made loans.

The mortgage lending business is highly competitive, and we compete with numerous established entities, some of which have more financial resources and experience in the mortgage lending business than RMC. We will encounter significant competition from banks, insurance companies, savings and loan associations, mortgage bankers, real estate investment trusts and other lenders with objectives similar in whole or in part to ours.

Human Capital Resources

The manager provides the personnel and services necessary to conduct business as the partnership has no employees of its own.

Regulations

We are engaged in business as a mortgage lender and investor by making and holding-for-investment loans secured by California real estate, primarily through first and second deeds of trust.  We and RMC, which arranges and generally services our loans, are heavily regulated by laws governing lending practices at the federal, state and local levels. In addition, proposals for further regulation of the financial services industry continually are being introduced. The laws and regulations to which we and RMC are subject include rules and restrictions pertaining to:

Key federal and state laws, regulations, and rules relating to the conduct of our business include the following:

The California Real Estate Law, codified in California Business and Professions Code Sections 10000 et seq., together with the Real Estate Commissioner’s rules thereunder, govern the licensing, administration and activities of licensed real estate brokers (including certain mortgage loansloan brokers) in the State of California, including rules relating to, among other things, licensing, borrower and investor disclosures, compensation and fees, disciplinary action, and transactions involving trust deeds and real property sale contracts generally.  We are not a licensed real estate broker but our manager, RMC, is so licensed and will beis subject to those laws and regulations.

RMC’s loan files and other books and records are subject to examination by the California BureauDepartment of Real Estate.  Such examinations, as well as new regulations that may be issued in the future, could ultimately increase RMC’s and our administrative burdens and costs.

This federal law passed in 2010 imposes significant regulatory restrictions on the origination of residential mortgage loans, under sections concerning “Mortgage Reform and Anti-Predatory Lending.” For example, when a consumer loan secured by a dwelling is made, the lender is required to make a reasonable and good faith determination, based on verified and documented information concerning the consumer’s financial situation, as to whether the consumer has a reasonable ability to repay a residentialthe mortgage loan before extending the loan. The act calls forestablished regulations prohibiting a creditor from extending credit to a consumer secured by a high-cost mortgage without first receiving certification from an independent counselor approved by a government agency. The act also addsadded new provisions prohibiting balloon payments for defined high-cost mortgages. The act established the Consumer Financial Protection Bureau (CFPB)(“CFPB”), giving it regulatory authority over most federal consumer-lending laws, including those relating to residential mortgage lending, and oversight over companies that provide consumer financial products or services, including us. Many of the federal regulations governing mortgage lending have been significantly amended and expanded through the passage of the Dodd Frank Act.

The act also enhanced regulatory requirements on banking entities and other organizations considered significant to U.S. financial markets and provides for reform of the asset-backed securitization market. We do not expect these particular regulatory changes will have a material direct effect on our business or operations.

RESPA is a federal law passed in 1974 with the purpose of establishing settlement procedures for consumer real estate purchase and refinance transactions on residential (1-4 unit) properties. It establishes rules relating to affiliated business relationships, escrow accounts for property taxes and hazard insurance and loan servicing, among other things. It prohibits unearned referral fees from being charged in a covered transaction. RESPA and TILA (discussed below) also governsgovern the format of the Loan Estimate and the ClosingTILA-RESPA Integrated Disclosure forms, or “TRID” provided to consumers in residential real estate mortgage transactions.

TILA is a federal law passed in 1968 for the purpose of regulating consumer financing. For real estate lenders, TILA requires, among other things, advance disclosure of certain loan terms, calculation of the costs of the loan as demonstrated through an annual percentage rate, and the right of a consumer in a refinance transaction on their primary residence to rescind their loan within three days following signing of the loan document. TILA and RESPA (discussed above) also govern the format of the TILA-RESPA Integrated Disclosure forms, or “TRID” provided to consumers in residential real estate mortgage transactions.

HOEPA is a federal law passed in 1994 to provide additional disclosures for certain closed-end home mortgages. These “high-cost” closed-end home mortgages are loans with interest rates and fees in excess of certain percentage or amount thresholds. These regulations primarily focus on additional disclosure with respect to the terms of the loan to the borrower, the timing of such disclosures, and the prohibition of certain loan terms, including balloon payments and negative amortization. Failure to comply with the regulations will render the loan rescindable for up to three years. Lenders can be held liable for attorneys’ fees, finance charges and fees paid by the borrower and certain other money damages.  Similarly, in California, Financial Code Section 4970, et. seq., became effective in 2002. It provides for state regulation of “high-cost” consumer residential mortgage loans (also called “covered loans”) secured by liens on real property. Section 4970 defines covered loans as consumer loans on primary residences in which the original principal balance of the loan does not exceed the most current conforming loan limit

for a single-family first mortgage loan established by the Federal National Mortgage Association, with interest rates

and/or fees exceeding one of the statutorily defined percentage or amount thresholds. The law prohibits certain lending practices with respect to high-cost loans, including the making of a loan without regard to the borrower’s income or obligations. When making such loans, lenders must provide borrowers with a consumer disclosure and provide for an additional rescission period prior to closing the loan.

This federal law enacted in 2008, regulates the timing and delivery of loan disclosures for all mortgage loan transactions governed under the Real Estate Settlement Procedures Act.

This federal law enacted in 1975 provides for public access to information on a lender’s loan activity. It requires lenders to report to their federal regulator certain information about mortgage loan applications it receives, such as the race and gender of its customers, the disposition of the mortgage application, income of the borrowers and interest rate (i.e. APR) information. Amendments to HMDA became effective on January 1, 2018. Under the amended regulation lenders will be required to report 40 additional data points on their loan applications, including borrower age and credit data, lender fees, debt-to-income ratios and loan-to-value ratios.

This federal rule was issued in 2007 under Section 114 of the Fair and Accurate Credit Transactions Act of 2003 and amended by the Red Flag Program Clarification Act of 2010. It requires lenders and creditors to implement an identity theft prevention program to identify and respond to account activity in which the misuse of a consumer’s personal identification may be suspected.

This federal act passed in 1999 requires all businesses that have access to consumers’ personal identification information to implement a plan providing for security measures to protect that information. As part of this program, we provide applicants and borrowers with a copy of our privacy policy.

This series of state laws, which initially became effective January 1, 2013, with many sections renewed and modified as of January 1, 2019, is intended to ensure fair lending and borrowing practices for California homeowners by guaranteeing basic fairness and transparency during the foreclosure process. Key provisions include restrictions on dual-track foreclosures, a guaranteed single point of contact, civil penalties for lenders filing unverified documents, and protections for tenants of foreclosed properties. HOBR also provides borrowers with the authority to seek redress of material violations of its rules, such as by an injunction (prior to foreclosure sale) or recovery of damages (after foreclosure sale).  In 2020, HOBR protections were extended to residential one to four unit properties occupied by tenants as their principal residence.  

California Consumer Privacy Act of 2018 (“CCPA”) and California Privacy Rights Act of 2020 (“CPRA”)

Enacted in 2018 and effective January 1, 2020, the CCPA provides California consumers with broad rights regarding the use and sale of personal information collected by businesses covered by the CCPA.  Enacted in 2020 and scheduled to become operative on January 1, 2023, the CPRA expands the scope and applicability of the CCPA while introducing new privacy protections that extend beyond those included in the CCPA and its implementing regulations.  The CPRA also established a new enforcement body, the California Privacy Protection Agency (“CPPA”) and requires additional rulemaking on a number issues by the CPPA prior to its effective date.  

The CCPA generally applies to businesses that both collect personal information from California consumers and either (i) have $25 million or more in annual gross revenues; or (ii) derive more than 50% of their annual revenue from selling consumers’ personal information.  Covered businesses are required to disclose the categories of personal information collected about consumers and to adopt privacy policies and procedures that, among other things, specifically allow consumers to request the deletion of their information and to exclude their information from sale.  The CPRA maintains the CCPA's existing monetary threshold for application to businesses with annual gross revenue over $25 million; however, it modifies the thresholds with respect to businesses that buy and sell personal information and deletes a commercial purpose limitation contained in the CCPA.

Neither the partnership nor RMC has or will sell information collected from consumers in connection with their lending businesses.  RMC does, however, collect personal information from potential borrowers, investors and other parties that constitutes personal information governed by the CCPA and the CPRA.  Some of this personal information is also shared with the partnership and other loan programs it manages for the purposes of conducting their business operations.  RMC and its loan programs currently do not have $25 million in gross revenues and are not directly subject to the CCPA.  However, RMC, the partnership and RMC’s other loan programs may, in the aggregate, exceed this $25 million threshold in the near future and RMC is currently in the process of voluntarily incorporating all or some of the CCPA requirements into its current privacy policies and intends to incorporate some or all of the CPRA requirements into its policies and procedures as implementing regulations and other guidance is released by the CPPA.  

COVID-19 Foreclosure & Eviction Moratoriums

In addition, keyresponse to the economic hardships caused by the COVID-19 epidemic the federal government, California and some other states as well as localities have imposed foreclosure and eviction moratoriums temporarily restricting the ability of lenders and property owners to initiate or continue foreclosure and eviction proceedings against individuals adversely affected by the COVID-19 pandemic.  The terms during which such moratoriums will remain effective vary and each remains subject to extension by the enacting governmental body. While effective, foreclosure moratoriums restrict our ability to foreclose on certain types of properties securing defaulted loans and increase the overall timeline to resolve these non-performing loans. Eviction moratoriums adversely affect the ability of our borrowers to collect rent from their properties which, in turn, may affect their ability to make payments on our loans.  

Key federal and state laws, regulations, and rules are applicable as a result ofrelating to the offering of our units.units include the following.

Because our offeringsoffering of limited partnership interests werewas registered under the Securities Act of 1933, as amended, and we have registered the limited partnershippartner interests pursuant to Section 12(g) of the Exchange Act, we are subject to the requirements of a public reporting company. PublicAs a public reporting companiescompany, we are required to file annual, quarterly and other periodic reports with the SEC and comply with applicable provisions of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the related rules and

regulations promulgated by the SEC. However, as discussed in Item 9.A.9A of this report, the partnership is externally managed by RMC and many of the requirements of Sarbanes-Oxley are not directly applicable to us since we do not have a board of directors, including an independent board member. The registration of our limited partnership interests pursuant to Section 12(g) of the Exchange Act, along with the satisfaction of certain other requirements under the Employee Retirement Income Security Act of 1974 (“ERISA”), enables the unitslimited partnership interests to qualify as “publicly-offered securities” for purposes of ERISA and regulations issued thereunder. See Section 9A of this report.

RMC, as our manager, is responsible for establishing and maintaining adequate internal control over financial reporting with respect to us as required by Section 404 of Sarbanes-Oxley and rules and regulations of the SEC thereunder. RMC is required to review and evaluate on an annual basis our internal control over financial reporting, and on a quarterly basis, to evaluate changes in our internal control over financial reporting. See Section 9.A.

In 2015 the SEC approved amendments to rules of the Financial Industry Regulatory Authority (“FINRA”) applicable to securities of direct participation programs, such as our units and to non-listed real estate investment trusts. The amendments, which became effective on April 11, 2016, provide, among other things, that (i) FINRA members distributing our units must include in customer account statements our per unit estimated value that must be developed using a methodology reasonably designed to ensure our per unit estimated value’s reliability; and (ii) our per unit estimated value disclosed from and after 150 days following the second anniversary of the admission of investors in our public offering must be based on an appraised valuation methodology developed by, or with the material assistance of, a third-party expert and updated on at least an annual basis. The rule changes also provide that the account statements must include additional disclosure regarding the sources of our distributions to unit holders.limited partners.

COVID -19

The COVID-19 pandemic and the measures taken (and ongoing) to limit to the extent possible the spread of the virus had an impact on various aspects of our investments and business and on the operations and business of our manager. The national, California, and local economies – and the real estate markets - continue to be impacted, often adversely, by COVID-19. Unless and until a significant and sustained broad-based economic recovery occurs there exists greater likelihood of a negative impact on our business and/or investments. The continued spread of COVID-19 or any other similar outbreaks in the future and the continued impact on social interaction, economies and financial markets may have significant adverse effects on (i) California real estate markets and thereby the partnership’s business, financial condition and result of operations due to the possibility of some borrowers having a reduced capacity and/or commitment to make principal and interest payments (ii) a decrease in the volume of loans funded and (iii) a decline in the values of the California real properties that serve as collateral for the loans. Declines in the value of real estate may lead to increases in the allowance for loan losses. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which may lower the interest rate charged by banks and other competitors of the manager for real estate secured loans and which may reduce loan originations and increase loan payoffs. Such outcomes would negatively affect interest income and, therefore, earnings, financial condition and results of operations of the partnership. The extent of the impact of the COVID-19 pandemic on our capital, liquidity, and other financial positions and on our business, results of operation and prospects will depend on a number of evolving factors, including:  

We are subject to the state securities laws (“blue sky laws”) of the states in which we sold limited partnership interests. Under these blue sky laws, we were required to register or obtain an exemption from registration for our limited partnership interests in each state we intended to sell our limited partnership interests before we could begin to sell in a state. Also, many states have adopted or apply the Mortgage Program Guidelines adopted by the North American Securities Administrators Association (“NASAA”). Some states required us to include certain offering terms in order to comply with certain provisions of the NASAA Mortgage Program Guidelines in effect at the time that we might not have included if we were not subject to the state blue sky laws.

Term of the partnership

The Partnership Agreement provides that the partnership will continue until 2032, unless sooner terminated as provided interminated.

Delivery of Annual Report

The Partnership will send an annual report to all holders of partnership interests and the partnership agreement.report will include audited financial statements.

Additional Information

The SEC maintains an Internet site that contains reports and other information regarding our annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K (and amendments to these reports).  These filings are available free of charge on the SEC website at www.sec.gov.  The above references to the SEC’s website does not constitute incorporation by reference of the information contained on that website and should not be considered part of this document.

Item 1A – Risk Factors

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.  

Item 1B – Unresolved Staff Comments

We are a smaller reporting company and a non-accelerated filer, both as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 2 – Properties

None. The partnership has no operations of its own.

Our address is RMC’s principal office space. RMC is located in leased space at 177 Bovet Road, Suite 520, San Mateo, CA 94402.

Item 3 – Legal Proceedings

See Note 5 - Real Estate Owned (REO)8 (Commitments and Contingencies Other than Loan and REO Commitments) to the financial statements included in Part II, Item 8 of this report for a description of REO propertiesinformation regarding legal proceedings, which descriptionpresentation is incorporated by this reference into this Item 2.3.  

Item 3 – Legal Proceedings

In the normal course of our business, we may become involved in legal proceedings (such as assignment of rents, bankruptcy proceedings, appointment of receivers, unlawful detainers, judicial foreclosure, etc.) to collect the debt owed under the promissory notes, to enforce the provisions of the deeds of trust, to protect our interest in the real property subject to the deeds of trust and to resolve disputes with borrowers, lenders, lien holders and mechanics. None of these actions, in and of themselves, typically would be of any material financial impact to the net income or balance sheet of the partnership. As of the date hereof, we are not involved in any legal proceedings other than those that would be considered part of the normal course of business.

Item 4 – Mine Safety Disclosures

Not applicable.

Part II

Part II

Item 5 – Market for thethe Registrant’s Units,Common Equity, Related UnitholderStockholder Matters and Issuer Purchases of UnitsEquity Securities

Because thereThere are substantial restrictions on transferability of limited partnership interests, and there is no established public trading and/or secondary market for the limited partnership interests, and none is expected to developdevelop.

In order to provide liquidity to partners, we provide certain liquidation rights. See “Liquidity, capital“Capital withdrawals and early withdrawals” in Part I of this report.  As of February 28, 2018,2021, we had approximately 5,0003,076 limited partners with approximately 147,329,00082,546,000 units of limited partnership interest.

Recent sales of unregistered limited partnership interests

There were no sales of limited partnership interests by the partnership within the past three years.

Distributions

Cash distributions totaled $2,864,050approximately $1,832,000 and $2,637,026$2,343,000 in 20172020 and 2016,2019, respectively.  See “Distribution policy”“Distributions to limited partners” under Item 1- Business in Part I of this annual report, which discussion is incorporated by reference herein. We expect to make comparable distributions to limited partners in 2021.

Liquidity and capitalCapital withdrawals

Withdrawals in 2017 and 2016 by quarter are presented in the following table ($ in thousands). All withdrawal payments are processed on the last day of the quarter, and are valued at $1 per unit.

Fair market value / unit value

RMC obtained information regarding fair market valuations and unit value as of December 31, 2017 for RMI VIII inIn compliance with FINRA Rule 2310 concerning direct-participation-program value per unit estimates.estimates, RMC obtained information regarding fair market valuations of the net assets and unit value as of December 31, 2019, for RMI VIII. The valuation wasvaluations were performed by a qualified, nationally prominent firm in accordance with the objective, scope,assistance of an independent valuation firm that provides asset valuations to retirement plan sponsors, plan administrators, banking and approach established by RMC,trust companies, and isERISA plans. The fair values of the sole responsibility of RMC.individual properties were taken from appraisals which referenced the most current available market information such as listing agreements, offers, and pending and closed sales. Industry standard valuation approaches, including the Discounted Cash Flow, Income Market and Cost Approach, were utilized in deriving the fair values, as appropriate. There is no assurance that this estimated fair value of the membership units is or will remain accurate, and it does not determine the amount that a member is entitled to receive upon withdrawal of units. The withdrawal amount is determined by the applicable provisions of the Limited Partnership Agreement.

The fair value of a unit of RMI VIII was determined to be $0.98,$1.00, after consideration of the fair values of the net assets held and the restrictions in the withdrawal provisions in the Partnership Agreement and the restrictions on transferability of units.

The fair value of loan balances (i.e., principal plus interest) secured by deeds of trust, per the portfolio’s securedMarket Approach, is deemed to approximate the recorded amount (per the financial statements) as our loans:

The fair value less cost to sell of the REO portfolio is $140.3$9.3 million, representing a premium of approximately $3.4 million$500,000 over the book value, per the analysis, based principally on discounted cash flow for the loans and market values for comparable REO.

The assets are valued based on the appropriate application of industry standard valuation approaches including the discounted cash flow, income, market, and cost approaches. Although all four approaches are considered in a comprehensive valuation analysis, the nature of the asset and the availability of data will dictate which approaches are ultimately utilized to derive each asset’s value.

Discounted Cash Flow Approach - The discounted cash flow method is comprised of four steps:

Income Approach - The income approach is a valuation technique that provides an estimation of the fair value of an asset, such as RMI VIII’s loans, based on the cash flows that an asset can be expected to generate over its estimated remaining economic term. This approach begins with an estimation of the annual cash flows a prudent investor would expect the subject asset to generate over a discrete projection period. The estimated cash flows for each of the years in the discrete projection period are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the asset’s projected cash flows. The present value of the estimated cash flows is then added to the present value equivalent of the residual value of the asset at the end of the discrete projection period to arrive at an estimate of fair value.

Market Approach - The market approach measures value based on what other purchasers in the market have paid for assets that can be considered reasonably similar to those being valued. When the market approach is utilized, data are collected on the prices paid for reasonably comparable assets. Adjustments are made to the comparable assets to compensate for differences between those assets and the asset being valued. In the case of real estate for example, adjustments might be made for location, quality or construction, and/or building amenities. The application of the market approach results in an estimate of the price reasonably expected to be realized from the sale of the property.

CostIncome Approach- The costincome approach is a valuation technique that provides an estimation of the fair value of an asset, such as RMI VIII’s loans, based on the premisecash flows that an asset can be expected to generate over its estimated remaining economic term. This approach begins with an estimation of the annual cash flows a prudent investor would pay no moreexpect the subject asset to generate over a discrete projection period. The estimated cash flows for an asset than its replacement or reproduction costs. The cost to replace the asset would include the cost of constructing a similar asset of equivalent economic utility at prices applicable at the timeeach of the valuation analysis. To arrive at an estimate of the fair value using the cost approach, the replacement cost new is determined and reduced for depreciation of the asset. In this context, depreciation has three components:

Physical deterioration is impairment to the condition of the asset brought about by wear and tear, disintegration, use in service, and the action of the elements. Functional obsolescence is the impairmentyears in the efficiencydiscrete projection period are then converted to their present value equivalent using a rate of return appropriate for the asset brought about by such factors as overcapacity, inadequacy or a change in technology that affectrisk of achieving the asset. Economic obsolescence is the impairment in the desirability of the asset arising from external economic forces, legislative enactment, or changes in supply and demand relationships.asset’s projected cash flows.

The primary purpose of the valuation was to determine the fair value of a unit of partnership interest in RMI VIII. There is no assurance that this estimated value is or will remain accurate, and it does not determine the amount that a partner is entitled to receive upon redemptionwithdrawal of units. RMC makes no representation, express or implied, that a unit of RMI VIII could or would be transferred by an investor for the stated fair value.

Item 6 – Selected Financial Data

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the audited financial statements and notes thereto, which are included in Part II, Item 8 of this Report.

General Partners

See Notes 1 (Organization and General) and 3 (General Partners and Other Related Parties) to the financial statements included in Part II, Item 8 of this report for a detailed presentation of various partnership activities for which the general partners are compensated, including the formation loan, which presentation is incorporated by this reference into this Item 7.

Critical Accounting Policies

See Note 2 (SummaryThe preparation of Significant Accounting Policies)financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions about the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities, at the dates of the financial statements included in Part II, Item 8and the reported amounts of this reportrevenues and expenses during the reported periods. Such estimates relate principally to the determination of the allowance for a detailed presentationloan losses, including, when applicable, the valuation of critical accounting policies, which presentation is incorporated by this reference into this Item 7.impaired loans (which itself requires determining the fair value of the collateral), and the valuation of real estate owned, at acquisition and subsequently. Actual results could differ materially from these estimates.

Allowance for loan losses

Loans and the related accrued interest and advances (i.e., the loan balance) are analyzed on a periodic basis for ultimate recoverability. Collateral fair values are reviewed quarterly and the protective equity for each loan is computed. As used herein, “protective equity” is the dollar amount by which the fair value of the collateral, net of any senior liens, exceeds the loan balance, where “loan balance” is the sum of the unpaid principal, advances and the recorded interest thereon. This computation is done for each loan (whether impaired or performing), and while loans secured by collateral of similar property type are grouped, there is enough distinction and variation in the collateral that a loan-by-loan, collateral-by-collateral analysis is appropriate.

A provision for loan losses to adjust the allowance for loan losses (principal and/or interest) is recorded such that the net carrying amount is reduced to the lower of the loan balance or the estimated fair value of the related collateral, net of any senior loans and net of any costs to sell in arriving at net realizable value.

At foreclosure, any excess of the recorded investment in the loan (accounting basis) over the net realizable value of the collateral is charged against the allowance for loan losses.

Fair value estimates

The fair value of the collateral is determined by exercise of judgment based on management’s experience informed by appraisals (by licensed appraisers), brokers’ opinion of values, and publicly available information on in-market transactions. Appraisals of commercial real property generally present three approaches to estimating value: 1) market comparables or sales approach; 2) cost to replace; and 3) capitalized cash flows or income approach. These approaches may or may not result in a common, single value. The market-comparables approach may yield several different values depending on certain basic assumptions, including adjustments made for any attributes specific to the real estate property.

Management has the requisite familiarity with the markets it lends in generally and of the properties lent on specifically to analyze sales-comparables and assess their suitability/applicability. Management is acquainted with market participants – investors, developers, brokers, lenders – that are useful, relevant secondary sources of data and information regarding valuation and valuation variability. These secondary sources may have familiarity with and perspectives on pending transactions, successful strategies to optimize value, and the history and details of specific properties – on and off the market – that enhance the process and analysis that is particularly and principally germane to establishing value in distressed markets and/or property types.

Real estate owned (REO)

Real estate owned (REO) is property acquired in full or partial settlement of loan obligations generally through foreclosure, and is recorded at acquisition at the property’s net realizable value, which is the fair value less estimated costs to sell, as applicable. After acquisition, costs incurred relating to the development and improvement of property are capitalized to the extent they do not cause the recorded value to exceed the net realizable value, whereas costs relating to holding and disposition of the property are expensed as incurred. After acquisition, REO is analyzed periodically for changes in fair values and any subsequent write down is charged to operations expense. Any recovery in the fair value subsequent to such a write down is recorded, not to exceed the value recorded at acquisition. Recognition of gains on the sale of real estate is dependent upon the transaction meeting certain criteria related to the nature of the property and the terms of the sale including potential seller financing.

Results of Operations

COVID-19

During the first half of 2020, as a result of the disruptions caused by the pandemic, the partnership experienced a manageable increase in delinquencies and requests for forbearance agreements from borrowers, which declined during the second half of 2020. One borrower went to foreclosure in June 2020, and no loss was recorded as the net realizable value of the properties acquired approximated the partnership’s legal basis in the applicable notes.

Market conditions, regulatory restrictions on our enforcement rights with respect to loans in default, delays in foreclosure proceedings, including moratoriums in some jurisdictions, and backlogs in the courts increased the timeline to resolve non-performing and /or maturing loans.  The majority of our borrowers continued to make monthly payments and negotiated in good faith, resulting in extensions on terms consistent with the original loan terms.

Delays in repayment of maturing loans and/or sales of properties acquired by foreclosure reduce the capital available for future loan originations and for redemptions of limited partners’ capital. The bank line of credit, loan sales to unaffiliated third parties, and loan transactions with the related mortgage funds provided more than sufficient liquidity throughout the year.

Our ability to maintain operations, deliver high-quality service and continue strong financial performance throughout 2020 is the result of the diligent and persistent professional staff of the manager and our professional partners in law, accounting/tax and real estate. The women and men of RMC, working remotely and balancing family needs and work demands, exceeded any and all of our reasonable expectations in a time of uncertainty and tragic grief in our country.

General economic conditions -– California

All of our mortgage loans are secured by California real estate. Our secured-loan investment activity and the value of the real estate securing our loans is dependent significantly on economic activity and employment conditions in the California.  Wells Fargo’s Economics Group periodically provides timely, relevant information and analysis in its reports and commentary regarding California’s employment and economic conditions.  Highlights from a recently issued report from Wells Fargo Securities Economics Group is presented below.

In the publication “California Gets“California’s Recovery Was Upended by Another Round of Lockdowns” March 12, 2021:

Lockdowns Stifle California's Recovery – “The resurgence in COVID cases from over the winter months led to another round of lockdowns at restaurants in many parts of California, leading to substantial job losses in both December and January. California's employers eliminated 69,900 jobs in January, following a Jump on 2018” dated75,400-job drop in December. The bulk of declines in both months were at restaurants, bars, hotels and entertainment venues. With the number of new cases plummeting since the middle of January and new hospitalizations and deaths per day also falling sharply, California's economy is finally opening up in a convincing, and what looks to be, enduring way. Job growth should spring back to life in coming months as California gets back onto the road to recovery.”

California Took a Detour Off the Road to Recovery – “Nonfarm payrolls fell sharply in California during January, with 69,900 jobs lost during the month. January's decline follows a 75,400-job drop in December. Moreover, revisions to previously published data show that California's recovery has been weaker than previously reported. After losing 2,714,800 jobs in March 9, 2018:and April of last year, California has regained just 34% of those losses, or 921,900 jobs. Previous data had shown California had recovered 44% of its earlier losses. By contrast, the nation has recovered roughly 58% of the jobs it lost during last spring's lockdowns.”

“EmployersThe bulk of California's job losses over the past two months were in high-contact services. Restaurants, bars and hotels account for the Golden State added 35,500largest block of job losses, with the industry losing 70,600 jobs in January and 106,200 jobs in December. Other industries posting notable job losses in January include arts, entertainment & recreation (-11,500), health care & social assistance (-10,300) and transportation, warehousing & utilities (-13,500). Manufacturing and construction payrolls also declined in January, losing 4,600 and 4,000 jobs, respectively. With the annual benchmarking process revised 2017number of new cases falling sharply in recent weeks, California's economy is re-opening in a much more broad-based way, which we feel will prove enduring. The hard-hit hospitality sector should be the chief beneficiary, as it accounts for just over 44% of the 1.8 million job gains higher.  California’s jobless rate ticked 0.1 percentage point lower to 4.4 percent in January.losses outstanding from the spring lockdowns.”

“California’s 35,500-job gain continuedJobless Claims Have Been Trending Lower – “First-time unemployment claims have been trending lower in California, which seems at odds with the momentum builtrecent trend in 2017,overall payrolls. Initial claims fell by 1,487 in the latest report and are near their pre-lockdown lows. Fraudulent claims greatly inflated initial claims at the onset of the pandemic, and the state has made a determined effort to eliminate this fraud, which waslikely explains part of the recent improvement in the data.”

“Job openings have clearly improved, although they remain below the levels seen pre-pandemic. The largest gains have been in education, health care and social services. Job openings in manufacturing have also risen sharply, while openings in professional & business services and the leisure & hospitality sector have improved somewhat more modestly.”

The K-Shaped Recovery Is More Evident in California - “The deep job losses in California's hospitality sector and repeated lockdowns widened the gap in employment prospects between high-wage and low-wage workers. Employment among workers earning $60,000 a year fell by less and recovered sooner than it did for middle-income or lower-income workers. In fact, after a brief recovery last spring, employment among persons earning $27,000 a year or less in California has actually stronger than first reported.  California’s annual benchmark revision to payrolls revealed that employers actually added about 30,000trended lower. Lower income workers account for a larger share of workers in high-contact industries, which have been more jobsdirectly affected by the end of 2017 than originally estimated. Job growth accelerated furtherrepeated lockdowns put in January to a year-over-year increase of 2.2 percent, on a three month average basis, which represented a gain of 362,300 net new jobs. California’s payroll growth is on an upward trend and among the fastest in the nation, according to the September 2017 QCEW data, which inputs into the annual revisions. Only other states in the west added jobs faster than California.” …

“All of California’s main employment sectors are adding jobs, underscoring the broadening of the expansion beyond the tech and energy-driven growth that was the hallmark of the first half of the decade. That employers in all of California’s major metro areas added to payrolls over the past year is further evidence that more of the state is taking part in the economic expansion.  Construction job growth is being driven by strong demand for new homes, particularly on the more affordable end of the spectrum.  We expect construction payrolls to continue to grow rapidly, as long as workers can be found.place across California is in serious need of more housing stock. Similarly, health care workers are in high demand, which has propelled the sector to one of California’s fastest growing.  The tech sector remains a potent job driver, and strength in that area offset losses elsewhere in the information sector over the past year. Information payrolls rose 6,100 jobs despiteBy contrast, a 10,300-job lossfairly high proportion of California's higher-income workers tend to be employed in the motion picture industry and a 2,800-job loss in telecommunication.  Manufacturing is another sectorindustries that endured a rough patch in recent years, and the newly revised data show the sector rebounding slightly earlier and stronger than first thought.” …

“California’s labor force grew slightly faster than its population but not enough for a meaningful improvement in the labor force participation rate, which still trails the nation. California’s labor market apparently hascan more slack to absorb, particularly if its strong job growth entices more workers into the labor force from the sidelines. Labor market slack is an increasingly rare commodity among states, as labor shortages seep into more regions and sectors.  Even though California’s labor force has more slack than much of the nation, it is now the tightest it has been since the series began in 1976 and is drifting lower. Employment growth exceeded the labor force again in January to push the jobless rate down 0.1 percentage points to 4.4 percent.  The national jobless rate has been stuck at 4.1 percent since October.easily work remotely.”

Key performance indicators

Key performance indicators are presented in the following table for 20172020 and 20162019 ($ in thousands).

Secured loans

The December 31, 2017 end-of-period2020 secured loan balanceprincipal – end of period of approximately $74.1 million, was approximately $130.0 million, up 37.0%a reduction of 14.1% ($35.112.1 million) compared to the December 31, 2016 end-of-period2019 secured loan balance– end of period principal of approximately $94.9$86.2 million. The increase balance of the secured loan portfolio is declining as capital available to lend decreases over time due to partner withdrawals exceeding the 1) favorable economic environment generally andnet income retained in limited partners’ capital accounts. The reduction in capital available to the increased investment in California real estate markets specifically, and 2) the proceedslend from the decline in limited partners’ capital was offset in part – starting in September 2020 – by advances on the line of credit used to fund loan originations. The REO acquired in June 2020 by foreclosure sale reduced the capital available to lend; the properties were acquired subject to mortgages payable and will be listed for sale upon resolution of REO properties being reinvested, botha legal dispute with the former owner/borrower. Secured loans as a percent of which expands the opportunitymember’s capital (based on average balances) was 88.5% and 83.1% for new loans.2020 and 2019, respectively.

Loans generally are funded at a fixed interest rate with a loan term of up to five years. Loans acquired are generally done so within the first six months of origination, and purchased at the current par value, which approximates fair value.

As of December 31, 2017, 60 (83%)2020 limited partners’ capital-end of the partnership’s 72 loans (representing 97%period of the aggregate principalapproximately $83.0 million was a reduction of 16.0% ($15.8 million) compared to the partnership’s loan portfolio) had a loan term of five years or less from inception. The remaining loans have terms longer than five years. Substantially all loans are written without a prepayment-penalty clause. As of December 31, 2017,2019 limited partners’ capital - end of period of approximately $98.8 million primarily due to limited partner capital withdrawals, partially offset by net income retained in the capital accounts of partners not electing periodic distribution of net income. See Note 3 (General Partners and Other Related Parties) to the financial statements included in Part II, Item 8 of this report for detailed presentations on withdrawals of limited partners’ capital.

The outstanding balance on the line of credit was approximately $2.5 million at December 31, (43%)2020 and had an average daily balance since September 2020 of the loans outstanding (representing 66% of the aggregate principal of the partnership’s loan portfolio) provide for monthly payments of interest only, with the principal due in full at maturity. The remaining loans require monthly payments of principal and interest, typically calculated on a 30 year amortization, with the remaining principal balance due at maturity.approximately $3.1 million.

We have soughtcontinued to exercise strong discipline in underwriting loan applications and lending against collateral at amounts that create a mortgage portfolio that has substantial protective equity (i.e., safety marginsproperty value to outstanding debt) as indicated by the overall conservative weighted-average loan-to-value ratio (LTV)(“LTV”) at origination which at December 31, 20172020 was 55.6%53.8%. Thus, per the appraisal-based valuations at the time of loan inception, borrowers have, in the aggregate, equity of 44.4%46.2% in the property, and we as lenders have loaned in the aggregate 55.6%53.8% (including other senior liens on the property) against the properties we hold as collateral for the repayment of our loans.

Secured loans, principal by LTV and lien position are presented in the following table as of December 31, 2020 ($ in thousands). The LTV’s shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

Non-performing secured loans, principal by LTV and lien position are presented in the following table as of December 31, 2020 ($ in thousands). The LTV’s shown in this table are updated for any appraisals ordered and received by the manager after origination of the loan.

Payments in arrears for non-performing secured loans (i.e., principal and interest payments past due 30 or more days), are presented in the following table as of December 31, 2020.

See Note 4 (Loans) to the financial statements included in Part II, Item 8 of this report for detailed presentations on the secured loan portfolio and on the allowance for loan losses, which presentations are incorporated by this reference into this Item 7.losses.

Performance overviewoverview/net income 2020 v. 2019

For 2017, net

Net income available to limited partners as a percent of Limited Partners’limited partners’ capital – average balance was 3.8% and 4.0% for the years ended December 31, 2020 and 2019, respectively. Net income for 2020 was approximately $3.5 million, a decrease of $1.0 million from approximately $4.5 million for 2019. Net income for 2019, included a recovery of a loan loss from a prior year of approximately $1.6 million, before RMC costs.

Net interest income in 2020 decreased approximately $1.0 million from 2019. Interest income declined approximately $870,000 (11.1%) in line with the decrease of $10.9 million (12.0%) in secured loans - average daily balance was 2.9%. Distributions to those limited partners electing periodic distributions was 3.1%.

For 2017, continuing improvementoffset in interest on loans ($9.4 millionsmall part by a 0.1% increase in 2017, $7.1 million in 2016) is reflective of the growth in the portfolio of performing loans. For 2016, the effective yield rate to 8.7%. Interest expense in 2020 was approximately $143,000 on advances on the loan portfolio was higher thanline of credit and mortgages payable. There were no borrowings and no interest expense in 2019. In 2020 and 2019, revenue from late fees approximated $83,000 and $34,000, respectively. Gain on sale of loans approximated $26,000 and $38,000 for 2020 and 2019, respectively.

Operations expense for the portfolio interest rate (11.7% and 8.3%, respectively) due to default-rate interest received on two loans collected in September 2016.

Net income for 2017 wasyear ended December 31, 2020 declined approximately $4,623,000, a decrease of approximately $684,000 (12.9%$1.4 million (27.5%) compared to 2016 duethe year ended December 31, 2019 resulting from:

- the decline of approximately $334,000 in mortgage servicing fees ($175,000) and asset management fees ($74,000) resulting from declines in the secured loan principal and in limited partners’ capital; asset management fees in 2019 included $85,000 of fees earned and collected by RMC in conjunction with the $1.6 million loan loss recovery.

- the decline of approximately $535,000 in Costs from RMC, offset in part by an increase in professional services of approximately $124,000. In 2020 and 2019, RMC implemented methods to invoice the RMC-managed mortgage funds directly, in lieu of invoicing RMC and having the costs allocated to the decreaserespective funds.

- In 2019, REO valuation reserves were increased by $631,000; in 2020 there were no changes to the REO valuation reserves.

See “Analysis and discussion of income asfrom operations 2020 v. 2019” below for additional detail.

In March 2020, RMI VIII entered into a significant portionrevolving line of credit and term loan agreement (the loan agreement) with a bank pursuant to which RMI VIII can borrow up to a maximum principal of $10 million subject to a borrowing base calculation. Amounts borrowed under the loan agreement are secured by a first priority security interest in the notes and deeds of trust of the REO portfolio was liquidated and proceeds reinvested in loans. Total operations expense as a percent of interest income onpledged loans was 57.8% and 72.5% for 2017 and 2016, respectively.

REO income decreased approximately $2,658,000 (81.8%) for 2017 compared to 2016, due primarily to the sale of certain REO properties and the overall reduction in the REO portfolio. As the REO portfolio continues to sell in a favorable real estate market, and the proceedsborrowing base. The loan agreement matures March 13, 2022 when all amounts outstanding are reinvested in performing loans, REO income is expected to decline with offsetting increases to interest income. REO income includes earnings from rental operations, net of mortgage interest, holding costs of non-rental properties, and gains or losses on the sale of REO.then due.

Analysis and discussion of income from operations 20172020 v. 20162019

Significant changes to revenue and expense for 20172020 v. 20162019 are summarized in the following table ($ in thousands).

The table above displays only significant changes to net income for the period and is not intended to cross foot.

Interest on loansNet interest income

Net interest income decreased approximately $1.0 million for the year 2020 compared to the year 2019.

Interest income increaseddecreased approximately $2,277,000 for the year ended December 31, 2017$876,000 (11.1%) in 2020 compared to the same period in 2016 due to growth of the secured loan portfolio. The secured loans-2019. Secured loans principal – average daily balance increaseddecreased $10.9 million (12.0%) to approximately $34.7$80.2 million at December 31, 2020 ($91.1 million at December 31, 2019) consistent with the reduction in limited partners’ capital – end of period balance to approximately $83.0 million from $98.8 million, a $15.8 million (16.0%) decrease. The reduction in capital available to lend from the decline in limited partners’ capital was offset in part – starting in September 2020 - by advances on the line of credit used to fund loan originations. The REO acquired in June 2020 by foreclosure sale reduced the capital available to lend; the properties were acquired subject to mortgages payable and will be listed for sale upon resolution of a legal dispute with the former owner/borrower.

Interest expense for 2020 of $143,000 was comprised of interest of approximately $59,000 on two mortgages payable with principal totaling approximately $2.45 million acquired in conjunction with REO acquired in June 2020 by foreclosure; interest of approximately $44,000 on the line of credit advances; and approximately $40,000 of amortization of debt issuance costs associated with the line of credit since inception of the loan agreement in April 2020. There were no borrowings or approximately 42.6%.interest expense in 2019.

Provision for (recovery of) loan losses/allowance for loan losses

At December 31, 2017,Generally, the partnership had no has not recorded a provision/allowance for loan losses as allthe secured loans hadhave protective equity such that at December 31, 2017, collection wasis deemed probable for all recorded amounts owing.due on the loan. There were no additions made to the allowance in 2020.  

At December 31, 2020 and 2019 RMI VIII had a recorded allowance for loan loss of $50,000.

In 2020, the partnership collected and recorded a recovery of previously recognized loan losses of $134,000 from a court order dated June 2020 pursuant to the terms of a judgment dated October 2012 against a borrower/guarantor. In 2019, RMI VIII recorded and collected a recovery of previously recognized loan losses of $1.6 million pursuant to the terms of a workout agreement dated October 21, 2011, between RMI VIII and a borrower in default on certain loans secured by various California properties.

See Note 4 (Loans) to the financial statements included in Part II, Item 8 of this report for detailed discussion on the recovery of loan losses.

Operations expense 20172020 v. 20162019

Significant changes to operations expense for 20172020 v. 20162019 are summarized in the following table ($ in thousands).