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Banking Interpretations

NYSBL 340; 590

February 23, 2009

From: Steven Barras

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In response to your question, I note the following:

1. Licensed lenders may not secure loans with real estate under Article 9 of the BL Article 9 has no applicability to your question.

2. A mortgage banker license under Article 12-D of the BL is required for any lender who or which makes more than 4 loans in a calendar year secured by a lien on certain residential real property, more specifically, by a lien on a 1-4 family owner-occupied residence or co-ops located in this state. Therefore, the lender in question may make up to 4 loans on such property in a calendar year without first obtaining a mortgage banker license.

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Thanks for your responses. Another question:

Can a non licensed lender lend money to a foreign national on a property and secure it with a mortgage?

Thanks,

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From: Steven Barras

Regarding your question below, your client would be required to obtain a licensed lender license pursuant to the provisions of Section 340 of the Banking Law if all of the following apply to your client's proposed lending activities:

I. The loan amounts are $25,000 or less and are made for personal, family, household or investment purposes or $50,000 or less and are made for business or commercial purposes (loan amounts are per loan, not aggregate amount of all loans made).

2. The interest charged on such loans exceeds 16% per annum.

3. Loans are made to New York residents.

In response to your specific question on usury, I note that the legal rate of interest on loans made by a corporation or other legal entity to an individual is generally 16% per annum on loans not exceeding $250,000. The interest on loans made in excess of that amount generally may be made at a rate not exceeding 25% per annum. The interest rate on loans of $2.5 million or more may be at whatever rate is agreed to by the parties. There are exceptions to the 16% limitation for certain entities chartered and licensed under the Banking Law. Other laws also contain exceptions.

I trust the foregoing is responsive to your inquiries.


To: Steven Barras

02/04/2009 

Subject: Question

Here is the information I was seeking regarding the lending business a client is considering.

The business would be set up as a LLC, with a managing member and other members who would be investors. The LLC would loan money to individuals for personal expenditures such as cars, jewelry etc or if they were in between a work contract and needed money. Many of the borrowers would be out of state and would be athletes in between pay periods or signing bonus.

My questions are as follows:

1. Does the entity need to be licensed?

2. What is the usury rate from Corporation to an individual?

Also if there is any other information you might think useful.

All the best,

Thanks,

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