Usury Lending in CA - Posted by Kristine-CA

Posted by Diane (TX) on July 06, 2003 at 08:01:36:

Kristine: The lowest federal rate is based on overnight lending. The highest rate (for federal tax purposes) is the long-term rate, which applies to loans over 9 years. Just a guess, but if loans are amortized over 30 years, even if they have a balloon payment, I think they’re allowed the long-term rate.

For an idea of the different rates, here are the July 2003 rates for federal tax purposes: http://www.timevalue.com/Afr0703.htm . The July 2003 long-term rate is 4.17%. Add 4%, and you get 8.17%. Voila, there’s your 8%. I hope this helps.

Usury Lending in CA - Posted by Kristine-CA

Posted by Kristine-CA on July 06, 2003 at 24:45:25:

Greetings. Does anyone know where I can find out lending limits in CA? Specifically–maximum points/fees and interest.

Also, does anyone know if lending to owners with properties up for immediate tax sale in CA falls within the limitations for lenders regarding foreclosure?

I know you are probably not an attorney and hold you harmless for anything you opine in reply to this post.

Sincerely, Kristine

Re: Usury Lending in CA - Posted by Brad (CA)

Posted by Brad (CA) on July 06, 2003 at 19:21:24:

Hello Kristine,
I just wrote a response to your inquiry and then decided to do some small amount of research to get some more information. I originally had thought that the governing text for predatory lending was “section 32”, something I know next to nothing about in fact. I had first thought that the maximum points/fees/etc were 5.99% for loans under $322,700 and 7.99% for loans over that amount.
After some research, and disappointment in my lack of success finding a suitable source to research this “section 32” I came across another regulatory entity, “AB 489”. This California regulation/law(I dont know), effective 7/02, has more of the information I had been expecting. It appears however to merely require more paperwork/disclosures when brokering loans with either an APR higher than a certain amount, or points & fees greater than a certain amount. The APR must not exceed the yield of a Treasury security(of ~equal maturity) by 8 percentage points, and the points/fees must remain below 6 percentage points of the total loan amount. So it appears that some of my original knowledge was correct, perverted in form though it was. Another odd prerequisite of this regulation is that it applies only to loans whos principle balance is below $250,000.
So, I hope this answers some question, or provides you with enough information to more rigorously persue your inquiry.

Brad
-Disclaimer: I’m young and dont know everything.

http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=12&PART=226&SECTION=32&TYPE=TEXT -some info on Section 32

http://www.leginfo.ca.gov/pub/01-02/bill/asm/ab_0451-0500/ab_489_bill_20011011_chaptered.html -some info on AB 489

Re: Usury Lending in CA - Posted by Ben (NJ)

Posted by Ben (NJ) on July 06, 2003 at 06:39:19:

Kristine, the best thing you can do is contact your state’s mortgage banking association and take the licensing class. Even if you don’t need the license, at least you learn the law firsthand from qualified professionals.It will save you from alot of aggravation down the road.

Re: Usury Lending in CA - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 06, 2003 at 01:24:03:

Kristine Poe–(CA)--------------

As I told you a couple of days ago, if a real estate loan is “arranged” by a real estate broker, there is no limit to the interest rate.

As far as I know there is no maximum points/fees.

There is a formula for figuring out the maximum interest rate one can charge when the loan is not “arranged” by a real estate broker. It is somethink like the federal funds rate plus 4% or something like that. It will be very low these days.

Good Investing*Ron Starr

Re: Usury Lending in CA - Posted by Kristine-CA

Posted by Kristine-CA on July 06, 2003 at 21:17:56:

Brad: thanks for your reply. Don’t feel bad. I’m old and I don’t everything either.

What’s confusing me is how hard money lenders can charge between 12-18% (plus points, etc.) on refinance loans. I’m not against these kinds of loans. I’m just trying to figure out how they are legal? Nothing I’ve read so far says anything even close to allowing 18% for refinancing.

Thanks again. Kristine

Max interest rates - Posted by Kristine-CA

Posted by Kristine-CA on July 06, 2003 at 01:45:16:

Ron Starr: I don’t understand your comment about loans not arranged by real estate broker. People in my county are carrying paper all day long at 8% or better. Federal funds rate is 1% as of June 2003. Surely, trust deeds are being written all over CA for greater than 5% by sellers that are carrying paper. I’m confused.

Sincerely, Kristine

Re: Usury Lending in CA - Posted by Kristine-CA

Posted by Kristine-CA on July 06, 2003 at 01:39:34:

Ron Starr: thanks for your reply. There is no real estate broker in this deal. Probate attorney/estate contacted me. No way to involve a listing agent at this point. My understanding of usury was that mortgage brokers and banks are exempt from usuary (wonder how that law got passed??). Didn’t know that RE brokers had anything to do with “arranging” loans.

The trust deed/note business is too complicated for me to learn in a hurry, I think. But it sure is interesting.

Sincerely, Kristine

Re: Usury Lending in CA - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 06, 2003 at 22:35:10:

Kristine Poe–(CA)-------------------

If the loans are “arranged” by a real estate broker, there is no limit on the interest rate.

Good InvestingRon Starr****

Re: Max interest rates - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on July 06, 2003 at 08:54:05:

Kristine Poe–(CA)----------------

Perhaps the loans were arranged by real estate brokers involved with the transaction.

Perhaps there is an exception for owner-carry loans. I don’t know. You might contact Mike at www.bawb.info. He’s a real estate mortgage broker.

Good InvestingRon Starr