{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/470/30/#05-overview-and-background","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"470","topic_title":"Debt","subtopic":"470-30","subtopic_title":"Participating Mortgage Loans","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"470-30-05-1","para":"05-1","html":"
This Subtopic establishes the borrower's accounting for a participating mortgage loan if the lender is entitled to participate in any of the following:
  1. a
    Appreciation in the fair value of the mortgaged real estate project
  2. b
    The results of operations of the mortgaged real estate project.
","snippet":"This Subtopic establishes the borrower's accounting for a participating mortgage loan if the lender is entitled to participate in any of the following:\n(a) Appreciation in the fair value of the mortgaged real estate proj…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62d24965808b260b4c09738253e5e50c01d9fa919f6d1bd953c0466aaf49d756","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-2","para":"05-2","html":"
The desire for instruments in which the return to the lenders was tied more closely to the performance of the property led to the introduction of participating mortgage loans.
","snippet":"The desire for instruments in which the return to the lenders was tied more closely to the performance of the property led to the introduction of participating mortgage loans.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8ed4210f659f8ad2b872a136e624207eb6557640cf77573ba992333647d720c1","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-3","para":"05-3","html":"
Participating mortgage loans and nonparticipating mortgage loans share all of the following characteristics:
  1. a
    Debtor-creditor relationships between those who provide initial cash outlays and hold the mortgages, and those who are obligated to make subsequent payments to the mortgage holders
  2. b
    Real estate collateral
  3. c
    Periodic fixed-rate or floating-rate interest payments
  4. d
    Fixed maturity dates for stated principal amounts.
","snippet":"Participating mortgage loans and nonparticipating mortgage loans share all of the following characteristics:\n(a) Debtor-creditor relationships between those who provide initial cash outlays and hold the mortgages, and th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:59133c3612685e732c5c976050afd84163e85cd8471ecc17ef5935fbd0619e2d","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-4","para":"05-4","html":"
However, unlike a nonparticipating mortgage loan arrangement, in a participating mortgage loan, the lender participates in appreciation in the fair value of the mortgaged real estate project or the results of operations of the mortgaged real estate project, or in both.
","snippet":"However, unlike a nonparticipating mortgage loan arrangement, in a participating mortgage loan, the lender participates in appreciation in the fair value of the mortgaged real estate project or the results of operations …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e361b63c2913a66395bfca77a0d4fc8182956bd3d026e1b05ee5d5a48db6549","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-5","para":"05-5","html":"
The terms and economics of participating mortgage loan agreements vary by agreement. The terms and economics of one agreement may create a circumstance in which any participation payment is remote. In another agreement, the terms and economics may transfer many of the risks and rewards of property ownership.
","snippet":"The terms and economics of participating mortgage loan agreements vary by agreement. The terms and economics of one agreement may create a circumstance in which any participation payment is remote. In another agreement, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20f4d9cfe93040e0679e62675fb8cc421705f17a556d726e873e4a1d39216528","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-6","para":"05-6","html":"
A lender may be entitled to participate in appreciation in the fair value of a project at any one of the following times:
  1. a
    Upon the sale of the project
  2. b
    At a deemed sale date
  3. c
    At the maturity or refinancing of the loan.
","snippet":"A lender may be entitled to participate in appreciation in the fair value of a project at any one of the following times:\n(a) Upon the sale of the project\n(b) At a deemed sale date\n(c) At the maturity or refinancing of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bd75fcb3986a9ee3be904364e0a279b9a08abc670b90268bbe2e2512e3d039df","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-7","para":"05-7","html":"
In agreements in which lenders participate in results of operations, the definition of the results of operations may vary among agreements. Examples of these definitions include, but are not limited to, the following:
  1. a
    Revenue
  2. b
    Income
  3. c
    Cash flows before or after debt service.
","snippet":"In agreements in which lenders participate in results of operations, the definition of the results of operations may vary among agreements. Examples of these definitions include, but are not limited to, the following:\n(a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3ffb6e4cf176ef46f621dc02a64fbe9eb067be00a57a11d9f03d347769fb87a","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-8","para":"05-8","html":"
The participation terms of a participating mortgage loan agreement usually are negotiated concurrently with the other terms of the underlying mortgage loan. A borrower agrees to participation rights generally because of market conditions, or in exchange for concessions granted by the lender on some other term(s) of the loan, such as a lower interest rate or a higher loan-to-value ratio.
","snippet":"The participation terms of a participating mortgage loan agreement usually are negotiated concurrently with the other terms of the underlying mortgage loan. A borrower agrees to participation rights generally because of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8fdf1eb2d107857032bab45900a349627810b00040b5f445f7fd1316847fb2d","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},{"citation":"470-30-05-9","para":"05-9","html":"
The lender's participation reduces the borrower's potential realization of operating results or gain on the sale of the real estate. However, the participation also may reduce any of the following:
  1. a
    The contract interest the borrower is required to pay
  2. b
    The risk that the borrower will be unable to pay interest at the stated or floating rate in the loan agreement and, consequently, the risk that the borrower will default on the loan and need to sell the property
  3. c
    The amount of capital the borrower has at risk, because the loan-to-value ratio normally is higher.
Further, the obligation to pay the lender a share of the property appreciation does not increase the current exposure of the borrower to loss in its investment, because the participation payments are made only if the fair value of the property appreciates.
","snippet":"The lender's participation reduces the borrower's potential realization of operating results or gain on the sale of the real estate. However, the participation also may reduce any of the following:\n(a) The contract inter…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:012224be308d74f32acdb45ae545af2d179485932928cf95990fdbb3b1a38515","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bbd6304351330e71fd201c2954d8fb9313a748fa03867e8644b0a1a3121f56f2","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b8f96a20df8a7b79f4b4144225a5b7a6925e9f34d82564deccf9237b3f2e5404","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b8f96a20df8a7b79f4b4144225a5b7a6925e9f34d82564deccf9237b3f2e5404","downloaded_from":"2026-09-10T00:31:58.075Z","last_downloaded_at":"2026-09-10T00:31:58.075Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481448","source_sha256":"de1b3afeb4c1d151d23bb59866577185b0579cd40a045efc83123b83a9e1fe31"}}