Usury - Posted by Sheik

Posted by Paul Macdonald on November 17, 1998 at 16:05:37:

And probably didn’t even know I’d swung. Immediately after writing the above post, I read you posts about funding and refunding. They answered my question. My gut feelings were correct its nice to see.

Darn fast response there!

Paul Macdonald

Usury - Posted by Sheik

Posted by Sheik on November 17, 1998 at 09:06:42:

Hi John:

In another article you mentioned…

>>usury can be construed when you create a note and then
>>advance less than the face amount.

I have heard numerous examples about creating a
note on a property one is interested in buying and
selling the note (at a discount) to fund the deal
(There is a "success story by BEN(IN) on the main page
on this)

Depending on the discount, accordind to the above statement,
this may be usurious.

Please comment.


Could be - depends on state - Posted by John Behle

Posted by John Behle on November 17, 1998 at 11:34:54:

Usury laws vary widely from state to state. When the rates went ballistic in the 80’s, many states pushed the rates up high enough that it wouldn’t be problem anyway. Some states usury applies to private parties and not institutions. Other states like Utah have that reversed. An indivual in Utah may charge whatever they want, but there are limits for the institutions.

Like I said, it varies widely. If an institution is buying the note right out of escrow, presumably they know their risks. If you were to do it, you should know if usury could apply. One way an institution in our area does it is just to make sure they are not the original “Beneficiary”. As long as the note is originally to someone else, they will buy it later.

Re: Could be - depends on state - Posted by Paul Macdonald

Posted by Paul Macdonald on November 17, 1998 at 15:41:28:


Do you know a central location to find out about notes & usury laws? Actually do your books cover that information?

Relating to the creation of notes - I have approached a contractor who likes the idea of his writing the financing for his jobs and my buying them. By his being the initial owner of the note I’d have avoided usury concerns?

My principle line of work is mortgages - standard institutional - the creation of notes vs. the sale of notes is an idea at right angles to what I’m used to. You speak of improving the notes after you get them. Would it be better in the long run for me to buy the created note, fund it, wait whatever seasoning period is necessary/if necessary, and do a rate and term with the borrower OR hold the note for the duration?

Thanks for your time and advice,

Paul Macdonald