A parent took out a large loan against commercial real estate he owns. The loan is in foreclosure. The interest rate was 16 percent, all prepaid. There was also a prepayment penalty clause. The term was one year. The lender also took 6 origination points. (His broker took 2 points too.) My question is if prepaid interest can be used in calculating criminal usury, which is 25 percent in New York. I believe the Effective Interest Rate is how it is calculated, which appears to be higher than 25 percent IF prepaid interest is included. I know that there is some case law allowing broker's points to be included as well, so any information on that issue would be helpful also.
I should also add that the loan is with a private lender, without a license, and it was for under 2.5 million (but over 250,000).
Real Estate Attorney
If the Annual Percentage Rate for the loan exceeds 25% you have a case for criminal usury. This includes all forms of interest, whether prepaid or accrued, and points. If you think the rate exceeds 25% contact the district attorney.
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