Soleimany v. Narimanzadeh

Facts: A private lender originates a mortgage with a property owner. The mortgage is evidenced by a promissory note and secured by a trust deed on the owner’s property. The interest rate charged exceeds usury law limits. The owner has an unpaid mortgage balance on the due date for payment in full. The private lender seeks payment of the unpaid mortgage balance plus the statutory interest rate allowed on principal debt due and unpaid.

Claim: The private lender claims the owner owes interest from the due date for the principal balance until paid at the statutory interest rate for matured mortgages since statutory interest is not forfeited by usury law.

Counterclaim: The owner claims the private lender may not collect interest since the debt was subject to a forfeiture of all interest due to the usurious rate of interest earnings.

Holding: A California appeals court holds a non-exempt private lender originating a mortgage secured by real estate and calling for a rate of interest earnings exceeding usury law limits is entitled to receive interest on the unpaid principal balance to accrue from the final payment due date at the statutory interest rate. [Soleimany v. Narimanzadeh (2022) 78 CA5th 915]

Editor’s note – This private lender was a “non-exempt mortgage lender” and thus controlled by usury law.

Two exemptions exist for private lenders originating a mortgage. To avoid the usury law limits as exempt, a Department of Real Estate (DRE)- licensed real estate broker needs to be involved in the negotiations to originate the mortgage.

Alternatively, a private mortgage lender is exempt from usury law when the lender holds a DRE-issued broker license.

Read Soleimany v. Narimanzadeh, here

Related Reading:

Real Estate Finance

Chapter 38: Usury and the non-exempt lender

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Word of the Week: Usury