The Fourth Department determined the loan secured by a mortgage was not usurious. The $170,000 loan included $43,000 designated as interest. Whether the interest was usurious should have been determined based upon the term of loan, not when the foreclosure action was commenced:
In determining whether the interest charged exceeded the usury limit, courts must apply the traditional method for calculating the effective interest rate as set forth in Band Realty Co. v North Brewster, Inc. (37 NY2d 460, 462 …). According to that method, “[s]o long as all payments on account of interest did not aggregate a sum greater than the aggregate of interest that could lawfully have been earned had the debt continued to the earliest maturity date, there would be no usury” … . In applying the traditional formula, “[t]he discount, divided by the number of years in the term of the mortgage, should be added to the amount of interest due in one year, and this sum is compared to the difference between the principal and the discount in order to determine the true interest rate” … .
Applying that formula to the case at bar, which involves a five-year mortgage of $170,000 with a $43,000 “discount” with no additional interest, we add $8,600, which is one-fifth of the discount, to the interest over the first year (0%), arriving at a sum of $8,600. Comparing the $8,600 figure to the difference between the principal and the discount retained by plaintiff, i.e., $127,000, the interest rate was 6.77% per annum. That interest rate is well below the civil usury rate of 16% per annum … . Canal v Munassar, 2016 NY Slip Op 07793, 4th Dept 11-18-16
FORECLOSURE (LOAN WHICH INCLUDED A SET AMOUNT DESIGNATED AS INTEREST WAS NOT USURIOUS, CRITERIA EXPLAINED)/MORTGAGES (LOAN WHICH INCLUDED A SET AMOUNT DESIGNATED AS INTEREST WAS NOT USURIOUS, CRITERIA EXPLAINED)/USURY (LOAN WHICH INCLUDED A SET AMOUNT DESIGNATED AS INTEREST WAS NOT USURIOUS, CRITERIA EXPLAINED)