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It's 'Whatever the Market Will Bear'

October 16, 1994

In Kenneth R. Harney's Sept. 25 article entitled "Loan Scams Target Homeowners With Equity," a mention is made of a certain gentleman who needed $100,000 in cash quickly. In other words, time was of the essence. It was mentioned that the net fee for this quick cash, which came out of, presumable, a secondary mortgage against his home, initially came to $25,000, thus requiring him to ultimately pay back a total of $125,000 for the privilege of borrowing $100,000 in a real big hurry.

What is inherently wrong with this? Why does this transaction fall under the heading of "scam?"

The fact of the matter is that this gentleman needed that $100,000 in cash right then and there. Furthermore, a number of types of transactions are exempt from usury laws.

For example, broker-arranged loans are exempt. In the example cited in the article, it appears that that loan was broker-arranged. The standard on exempt transactions is "whatever the market will bear." In that case, that market dictated the terms of that loan. I see nothing illegal or improper about it, based on the facts as presented.

VICKI M. ROBERTS

West Los Angeles

The writer is an attorney.

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