Question: I am behind on my mortgage payments. The bank’s foreclosure sale is about a month away. We know someone who is willing to loan us some money at a high interest rate – 25%. We really appreciate the help, but is this something that is even legal?
Answer: Hypothetically, your savior lender can charge an interest rate of 100%. The law only requires the lender to notify the Attorney General’s Office of their intent to accommodate a high interest rate loan. Also, the lender must maintain records of your loan documents, in case the Attorney General wants to inspect them.
What exactly does the law consider a high interest loan? This can depend on which state you live in and their specific laws to follow. Rates higher than 20% are considered usurious and illegal without notice to the Attorney General. Notifying them is super important, because the criminal penalty can range to up to 2.5 years in prison or a fine of approximately $5,000.
In your case, decide if you are taking on too much debt to keep your house. It is clever to stop digging when you are stuck in a hole.
This article was originally published in the Lowell Sun and is for informational purposes only and not to be relied on as legal advice, in any manner.