I signed an agreement for repayment of $21K by June 2, 2011. 18% interest. If not paid, a deed of trust to my home for the amount when the house sells. Is this legal?
Optional Information: Country relating to Question: United States Already Tried: Settlement for less than the loaned amount to avoid court proceedings.
Hello. My name is XXXXX XXXXX X will be assisting you. This sounds like you secured the repayment of the $21K with a security interest in your home - like a mortgage. Is that what happened?
Yes. A deed of trust has been filed. State of Colorado.
Thanks for the additional information. I don't see any reason why that would be illegal. What they have done is secured repayment by using your home as collateral. Normally, this is probably not something you would want to offer or give. What it does is turn an unsecured loan into a fully secured loan. What was the original source of this $21k? How did it come about that you owed it?
Ernest monies on a lease option purchase that never came to fruition. Is the usury rate an issue? We have a buyer for the home but not enough in proceeds to cover the first mortgage holder and this lien in full, failure to complete this transaction will result in forclosure of the home.
Perhaps it is worth mentioning that we have since filed bankruptcy. Now completed. We have been released of our debts and this was included, however, I believe because it is a secured debt, we still owe it upon the sale of our home, yes?
Yes, that would most likely be correct, since the debt is secured by the real estate. If there is no equity in the home - between the mortgage and this loan, nobody really benefits from a foreclosure. The earnest money loan is in second position to your mortgage. Thus, if first lender forecloses, they get nothing. Why not negotiate based on that premise. You can threaten to walk and they get nothing. Or, they can negotiate something more reasonable.
I have tried just that.
My research indicated that the usury rate was excessive and therefor the agreement would be null and void, or the interest would not be collectable or lead to a class 6 felony and/or all of the above.
Any thoughts on this?
I am not aware of any usury issue at an annual rate of 18%, unless the effective calculated rate is actually much higher. Feel free to explain your usury theory to me, if you'd like.
Colorado has maximum usury rates. These rates max out at 15% (according to what I have read) above the amount loaned of $2,100.00 and even a lesser percentage in other cases. This has been my focus as I have exhausted all other avenues. Are you familiar with this?
My readings tell me that the maximum rate on a non-consumer loans is 45%. Here is a source. Let me know what you think: http://loansandlending.uslegal.com/interest/colorado-interest-rate-laws/
Here too: http://www.usurylaw.com/state/colorado.php
Consumer loans 12%
Non-consumer 45%
http://www.lectlaw.com/files/ban02.htm
Is this considered a non-consumer "loan"?
Yes - unfortunately, it is. You are not a "consumer" in this transaction. This is a loan between private parties.
Well then. Thank you. I can add this to my long list of "Stupids things I do when having good intentions".
Do you know if it is legal to make arrangements to purchase AFTER the foreclosure is complete PRIOR to the proceedings? (Clearly, little interest in purchasing this property will exists do to the outstanding encumbances)
Sorry about that. I still think you have some negotiating power when push comes to shove. For example, if your lender forecloses, their lien is wiped out. You filed for BK and discharged it, so all they have is the security interest in the property. They can't come after you personally.
I'm not following your last question. Feel free to re-state.
I have a 3rd party willing to contact the primary land contract holder to cut a deal and purchase the property AFTER the foreclosure when the additional lien has dropped off. Is this legal?
I agree where negotiating power is concerned, but the lien holder just doesn't get it. I've explained exactly what you have and indicated that it would make my situation no worse to allow forclosure proceedings...
Thank you for your help. Any thoughts on the deal prior to foreclosure?
There is no issue with the two parties getting together post-foreclosure to strike a deal, once the other loan is taken out. In fact, it happens all the time! On a deal before foreclosure, once again you can tell your $21k lender that you can get them some money with a reduced payoff now or no money once it forecloses. I don't know a better way to present it than that. They would be silly not to take something over nothing, but maybe they don't think you will let it foreclose. You may have to sit tight for a while and let things play out.
Experience: Corporate, Real Estate, Estate Planning, Probate and General Litigation attorney 14+ years