In March 2019, the Moons sought to refinance the loan and requested a payoff demand from Milestone. It increased the default interest rate and added language which applied the late charge to “any payment then due, including the final (balloon) payment.” These provisions were again supported by language reciting that these charges were reasonable liquidated damages. It recited that the new principal balance was $902,525.34. The Extension moved back the loan maturity date for an additional two years and provided for a slightly reduced interest rate of 11.05%. In August, 2016, Milestone and the Moons entered into an agreement titled “Settlement Agreement, Indemnity, and First Amendment to Promissory Note Secured by Deed of Trust” (the “Extension”). The Moons struggled with payments during the first year, and Milestone advanced taxes and insurance. The Note included a savings clause that limited the interest charged to the applicable legal rate (10%) in the event that a court found that the interest charged was “in excess of applicable law.” Both provisions were supported by language reciting that these were reasonable liquidated damages. The promissory note (“Note”) provided for a 10% late charge on delinquent monthly payments and a default interest rate of 17.3% plus late fees. The loan required monthly payments of interest only at 11.3% per annum and was all due and payable in two years. Two months earlier, the California Department of Real Estate had issued a cease and desist order forbidding Milestone from making mortgage loans until the appropriate licenses were obtained. Milestone did not have a real estate broker’s license and was not licensed as a mortgage loan originator under the California Finance Law or the California Residential Mortgage Lending Act. The Moons were represented by a California licensed real estate broker. In June, 2015, Mark and Lori Moon borrowed $759,000 for business purposes from Milestone Financial, LLC, secured by their residence. The following is an update analyzing a recent case of interest.īankruptcy Judge Montali applied California law to find that a “settlement agreement” extending the term of a business purpose mortgage loan was usurious, and that a late charge, applied to a balloon payment was unenforceable as liquidated damages. Uncategorized “Settlement Agreement” Extending Term of Business Mortgage Loan Usurious, and Late Charge, Applied to Balloon Payment Unenforceable as Liquidated Damages
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