Poke around in the “Reference Book” on the CA DRE site
Hopefully the Governator will forgive me a short quote:
“USURY
A loan, arranged extension, forbearance, or refinancing of a loan in which a broker had
originally been compensated (even though not being specifically compensated for
arranging new credit terms), secured in whole or in part by a lien on real property and
made or arranged by a licensed real estate broker is exempt from the usury law. Private
individuals making such loans without a broker are controlled by the usury law.”
passive investing and usury law applicability - Posted by Del DeVera
Posted by Del DeVera on August 11, 2004 at 23:28:40:
To whom it may concern,
I would like to invest in a real estate company that focuses on pre-forclosures. The company uses investors money to purchase the porperties and gives a return to the investors when the porperty has been resold. They have been offering a 20% yield/interest on the money invested for period of 4 months or sooner if the property has been resold. The transaction is secured by a investment agreement and promissory note. My question is, is this breaking the usury laws. I have been doing some research and I know that CA usury law limit on interest is 10%. Would this situation fit this category of law since it is similar to a joint venture where capital is invested to the property and the yield or interest is paid by the profit generated by the sale of the property.
Another question is about personal loans and using personal loans for investments. Do the personal loans fit under the usury laws and how does that differ from hard money loans that charge greater than 10%.
Thank you all for your time and look forward to your responses
Need to read YOUR law & decisions - Posted by John Merchant
Posted by John Merchant on August 13, 2004 at 22:45:10:
Basically law is somewhat different in every state on usury, and whether a recourse loan is usurious if ANYBODY on it, and being sued on it, is under attack for a debt bearing total interest that’s in excess of state’s interest cap…in CA, as you say, 10%.
We have a WA decision exactly on point ruling that trying to enforce a recourse provision against seller of the note WAS usury, in excess of WA’s 12% consumer loan rate…and was therefore totally null & void & uncollectable by creditor.
So anybody wondering what his law is, should spend a couple of hours in his law library and with the law librarian’s help, look at “usury” law in state of question.
Not difficult to read any state’s statutes and court decisions under it, in the “annotated version” of the statutes.