Ray, told me to try this forum - Posted by Dee-Texas

Posted by David Butler on August 16, 2001 at 24:51:10:

Hello Dee,

It’s late, and I apologize, but I’m short of the time to look through all my research materials to refer you to specific codes in Texas. But, most states do have specific exemptions to usury laws - and one very important one is related to “seller-carryback purchase money mortgage” financing. Last time I spoke with Texas officials was probably a year ago, but I am reasonably sure it applies there as well. You can easily find out, by contacting the Texas Consumer Credit Commission.

As we have posted here in this forum previously, these “seller-exemptions” from state and federal disclosure and usury laws exist, because they are not technically a “loan or forebearance” of money. Rather… they are considered dealyed payment of part of the purchase price of the property. Furthermore, the seller can subsequently sell his note, even to a non-exempt lender, and the note buyer inherits the exemption.

Generally speaking for example, even with that 10% rule, a property seller can carry back the financing on the sale of his own property, and charge 15%, 20%, even 25% in some states. Others have some limitations in general (think I posted something about that in relation to Oklahoma usury law here about three or four months ago). Anyway…

Like most law, there are some wavy lines around the edges, but for the most part this sellers-exemption is pretty clear cut, if you are merely a property owner, or an investor. Gets more “iffy” if you are a property dealer, similar to the installment sale rules under federal income tax law.

Hope that helps, and don’t lose any interest :wink:

David P. Butler

Ray, told me to try this forum - Posted by Dee-Texas

Posted by Dee-Texas on August 15, 2001 at 21:05:44:

I’ve been worrying about this usury law thing. I was wanting to sell a mobile or house on payments and wrap another. So I was searching the net looking for answers. I found this…Can anyone from Texas explain how we can wrap or make a loan on RE in Texas and not go over 10%…Or am I just totally wrong…Here is the part I found. It came from the Texas Finance Commission part of my search for Texas usury law…

Art. 5069-1.02. Maximum rates of interest

Except as otherwise fixed by law, the maximum rate of interest shall be ten percent per annum. A greater rate of interest than ten percent per annum unless otherwise authorized by law shall be deemed usurious. . . .

With a regulated loan license, or under other licenses and permits not applicable in this case, a lender may legally charge more than ten percent per annum interest. Otherwise, the lender may not legally do so. Furthermore, the charging of more than double the legal rate of interest (the situation presented in this case) is a misdemeanor and subject to criminal penalties. Article 5069-1.06 (2).
This had to do with a rental company charging 20% for their products. OR tell me where to find the information.

Thanks to all.
Dee-Texas

Re: Ray, told me to try this forum - Posted by Michel(tx)

Posted by Michel(tx) on November 03, 2001 at 03:01:56:

Hi Dee!

What did you find out? I’m about to sell a piece of land and I was going to ask for 12% int. Then, I would sell the note.

Thanks in advance!

Michel

Re: Ray, told me to try this forum - Posted by Dr. Craig Whisler

Posted by Dr. Craig Whisler on September 13, 2001 at 11:42:57:

When faced with unacceptable interest rate restrictions consider getting whatever amount of $ you desire per month by simply adjusting your price upward enough to make it come out the same even at the legal rate. Same difference to you. That’s why it is called “creative” real estate investing. Doc

Re: Ray, told me to try this forum - Posted by phil fernandez

Posted by phil fernandez on August 16, 2001 at 20:10:49:

Hi Dee,

How was your trip to the coast of Maine.

I agree with both Terry and David. In my state, seller financed mortgages are exempt from usary laws. Don’t know about Texas, but a few phone calls should clear up the issue down there for you.

Again that’s the beauty of real estate.

Re: Ray, told me to try this forum - Posted by Dee-Texas

Posted by Dee-Texas on August 16, 2001 at 07:19:18:

Thanks to Terry and David.
I’ve never been over here to read before…it just muddled my brain at first…it’s getting clearer.
Thank you for explaining and you can bet I’ll be reading more on your site. After evicting one this week, I’d rather deal with paper! S
Best Success,
Dee-Texas

Re: Ray, told me to try this forum - Posted by Terry Vaughan

Posted by Terry Vaughan on August 16, 2001 at 01:56:51:

Dee:

I knew David would give you a great answer.

And I agree with him with these additional thoughts:

  1. Most (most) of the time the type of law you are referring to is talking about “loans” made between private parties, not financed sales.

  2. Remember this type of paper is “consumer” paper, also reffered to as “chattel” morgages. This type of note is used to finance cars, furniture, washing machines, etc.

  3. You will find the laws concerning “usury” for this type of paper in the “personal property” lender laws of the state. Perhaps Consumer laws, or “chattle mortgage” law. A few phone calls or web-search should do it for you.

I would do the web-search for you, but I’m trying to wrap some things up and catch a plane in the morning for Europe - tight for time.

Hope this helps.

P.S. DAVID - I’ll call you when I get back!