Here is how it goes in California. Don’t know where you are and it is different in every state.
You lend the 8k and the loan is reinstated.
18 days go by and you get an excuse why the money did not arrive.
You go to evict. You get an answer from an attorney, stating that you have violated the usury laws which limit interest to 10% per annum, and cannot collect ANY interest for making the loan. The whole mess goes to court, where after 2 years, the judge rules that you attempted to take advantage of a helpless victim and fines you 5000 plus 63,000 in attorneys fees. You pay the 68,000 and have learned the valuable lesson, not to loan money to people that are 12 days away from foreclosure.
Buy the house at the foreclosure auction and re-sell it to make money here!!
I need advice to see if this deal structure is feasible and for all intents and purposes ok with Mr. government.
Here’s the deal:
home worth 240,000
1st of 180,000
2nd of 10,000
foreclosure in 12 days
arrearage total 8,000
homwowner wants to stay in the house and says he has the money coming in 18 days (I’ll be verifying if that is true of course) to reinstate the 8K. He wants me to loan him the money to reinstate (actually I’ll pay the fees directly to the bank to make sure the funds get there) and in return when his money arrives, he’ll pay me back the 8K plus 5K in 30 days.
I told him that for me to do this I would have to have a means of recouping my money if he didn’t pay me back. So I told him that He would need to deed me the property and then I would reinstate the mortgages and secure my interest with a 3rd mortgage (which really has little power) with some sort of 30 balloon (not sure how to do this).
If he got his money and paid me on time (which I told him that the rules are strict and if he’s late…he’s late…too bad) I deed the property back to him. If he doesn’t pay, we evict according to the law.
The homeowner understood what I proposed and knows the consequences. HERE’S MY QUESTIONS:
Is this on the up and up as far as a private loan goes or is there a usery law issue (or something like that that’s ringing in my head) that limits the amount of return on a hard money loan like this.
What are the best documents to secure this deal as far as the private loan goes (promissary not? )? I’ve done plenty of sub 2’s…no problem there.
Is there a specific way that I would word it in the loan docs that he gets the deed back upon complete and full payment of the loan from me or we get to evict?
Any other thoughts on this?
I’m just want to make sure this is on the up and up and that I’m not missing anything!