Mortgage Charges Usury

91 N.J.L.J. 373
June 6, 1968

OPINION 133
 
Mortgage Charges Usury

An attorney for a savings and loan association has inquired whether it is ethical to participate in a mortgage loan transaction involving the payment of "points" by the mortgagor in order to obtain the loan, wherein the lending institution is a savings and loan association of New Jersey.
The inquiry is directed to this Committee's Opinion 71, 88 N.J.L.J. 170 (1966), wherein attorney participation in a mortgage closing involving the payment of "points" by the mortgagor was held improper and unethical. Certain exceptions noted in the opinion are
where the charge was based on a bona fide service rendered to the borrower, and transactions eligible for insurance by the Federal Housing Administration.
This committee is requested to consider its opinion in the light of the "Savings and Loan Act (1963)" (L. 1963, c. 144) particularly, Section 48.(10):
Take from its members, a premium for priority or privilege of loan or acquisition of real estate and no premium so taken shall be deemed usurious. The rate of premium may be agreed upon or be determined by auction.
 
Clearly by statute the usury prohibition is made inapplicable to loans under the Savings and Loan Act, and attorney participation in the closing of such loans where, in accordance with the statute, premiums are charged to the borrower, would not be professionally improper.
This is another exception to the general principles enunciated in Opinion 71 of this Committee.