In re Moon Update; Forthcoming Changes to California Civil Code § 1916.1

In simple terms, if SB 1146 becomes law, there is no ambiguity that a lender will be able to modify or extend a mortgage loan in its portfolio without worrying about the transaction being deemed usurious if a California-licensed broker is involved in arranging the modification or extension.

This legislative change is a response to the U.S. Court of Appeals for the Ninth Circuit’s ruling in the In re Moon case. SB 1146 not only offers a clarification on safe harbors from state usury laws for lenders seeking to work with their borrowers to modify or extend a mortgage loan but also, hopefully, peace of mind for lenders when they navigate that process.

If SB 1146 becomes law, lenders should consult their legal counsel to determine how these usury exemptions afforded by the law can be utilized for their existing loan portfolios.