Pennsylvania CFD decision

[Chris Seveney]

I recently received a notice from my servicer which was sent by the PA attorney general.

The ruling was specific to a list of contract for deeds which were originated by Harbour portfolio. If your property was on the list you had to abide by terms I will highlight below.

Before we get to that the moral of this post is to make sure you understand the laws of the land as if not you could be snake bitten even by someone else’s faults.

I say this because the decision notes:

1. To convert the loan to a traditional mortgage and note

2. Reduce interest rate to state usury laws (6%) as interest rate was greater than 6%

3. Here is the dagger - return all interest paid above 6%. What this means is if the loan was originated in 2012 for 12% - between now and then you would have to credit the seller the overpaid interest.

So let’s say you bought this cfd last year, oh re on the hook for paying 10 years of overpaid interest even though you only owned asset for a year. You may think let me go back after seller - good luck - you should have known the rate was above what law allows (and your attorney on due diligence should have stated this).

This could cost on a loan originated at 50k loan the new holder $15-$20k. Ouch.

How to avoid this- have your attorney involved in your due diligence process and know your seller and chain of custody. This was not the first lawsuit against this originator and this had been going on for years.