Fifteen Percent (15 %) Interest Not Usury.

Plaintiff borrowed money from a mortgage lender secured by a deed of trust on certain real property. The interest rate was 15%, with interest-only payments from 2009 until 2012. When plaintiff defaulted, the lender foreclosed. Plaintiff filed suit against the lender claiming the interest rate on the loan exceeded the maximum allowed by the California Constitution, was usury, and therefore the trustee’s sale was void . In California, a loan secured by a lien on real property is exempt from the constitutional prohibition on usury if the loan is made or arranged by a licensed real estate broker. (California Constitution, Article XV, section 1; Civil Code section 1916.1.) Section 1916.1 explains that “a loan . . . is arranged by a person licensed as a real estate broker when the broker . . . acts for compensation or in expectation of compensation for soliciting, negotiating, or arranging the loan for another.” The appellate court held: “In this case, we conclude that even when the lender on such a loan is a corporation that is wholly owned by the arranging broker, the broker can still be found to have arranged the loan ‘for another’ for purposes of section 1916.1. We also conclude that in such a situation, the broker may be found to have arranged the loan ‘in expectation of compensation’ even if the only compensation the broker will receive is the profit his wholly owned corporation reaps from the interest on the loan.” Bock v. California Capital Loans, Inc. (Cal. App. Third Dist.; May 14, 2013) (As Mod. May 20, 2013) 216 Cal.App.4th 264.