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Nonsense Ruling In California

Loan modification and forbearance agreement execution in CA takes a weird turn. Based on the 2023 Moon Bankruptcy case, a loan modification or forbearance in California, which was properly originated by a licensed California real estate broker, and exempt from California’s usury laws, is no longer exempt, unless the original purchase or selling broker of the property arranges the forbearance/modification on behalf of the investor. Usury law limits the fees and other costs lenders can charge to borrowers. Usury laws were enacted to prevent unethical or immoral loans that unfairly enriched the lender. California’s usury limit of 10% total int rate including penalty on the loan under the law.

So in the high rate environment, a mod document in CA should be executed by the original selling broker to make sure that loan falls under usury exemption on rates. The issue is that servicers do not typically keep in contact with selling brokers, nor do they count on receiving cooperation.
Hope this will be overturned or clarified.

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