Loans Arranged by Real Estate Brokers Are Exempt From Prohibition on Usury

  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. Civil Code 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 with the expectation of compensation for soliciting, negotiating, or arranging the loan for another.

  In Brock v. California Capital Loans the court held 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. In such a situation, the broker may also 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.

iStock_000016600371XSmall  I consult with clients and accept cases involving the prosecution and defense of usury claims. For other types of cases I accept, please consult the My Practice page. If you are seeking a consult or representation, please give me a call at 818.971.9409. – Michael Daymude

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