Copyright Lex Mundi Ltd.

2008

Issues Relating To Finance U.S.A. LOUISIANA Lemle & Kelleher, L.L.P.

CONTACT INFORMATION James R. Conway III Lemle & Kelleher, L.L.P. Pan-American Life Center 21st Floor 601 Poydras Street New Orleans, Louisiana 70130-6097 504.584.9433 jconway@lemle.com www.lemle.com 1. What instruments are used to create a lien on real estate to secure an indebtedness (e.g., a mortgage or deed of trust)? A mortgage is the primary instrument that creates a lien on real (immovable) property in Louisiana. Indebtedness can also be secured by a vendors privilege in the form of an Act of Credit Sale. The vendor is entitled to a privilege on the real (immovable) property for the payment of the price or so much of it as is unpaid. La. Civil Code art. 3249(1). 2. Describe [national] [state] [territorial] [provincial] or local mortgage recording or other similar taxes payable on making a loan secured by real estate or perfecting a lien on real property. There is no mortgage tax in Louisiana. 3. Describe manner in which a lien secured by real property is foreclosed. There are two statutory methods in Louisiana for foreclosing upon real (immovable) property upon the breach of a mortgage or vendors privilege: (1) ordinary process; and (2) executory process. Either process should be brought in the District Court of the parish in which the real (immovable) property is located.

 Copyright Lex Mundi Ltd. 2008

4. Describe any significant costs of or impediments to foreclosing a lien on real property. Executory process can only be used if the act of mortgage or vendors privilege is in authentic form (i.e., executed before a notary and two (2) witnesses) and includes a confession of judgment (La. Code of Civil Procedure art. 2631). An act contains a confession of judgment if the obligor acknowledges the obligation secured by the act and confesses judgment thereon if the obligation is not paid when due (La. Code of Civil Procedure art. 2632). 5. What is the customary time period for foreclosing a lien on real property? If the action is brought by ordinary process and the action is contested, there is no specific time frame and the proceeding will progress in the same manner as other litigation matters generally. A noncontested foreclosure by executory process, which is an accelerated procedure, may take 60-90 days to complete. 6. Are there [national] [state] [territorial] [provincial] or other local governmental permissions, approvals or licenses required for foreign banks or other foreign lenders to make real estate loans secured by real property? If so, please describe. No. As a general rule, a lender that is a foreign entity does not have to qualify to do business in Louisiana if the lenders activities in the state involve creating evidences of debt, mortgages or liens or securing or collecting debts or enforcing any rights in property securing the same. La. R.S. 12:302. Foreign banks organized under the laws of the United States of America are specifically permitted to make loans secured by real (immovable) property in Louisiana and to acquire such property under foreclosure sale or in lieu of foreclosure without requiring the bank to qualify to do business in Louisiana. La. R.S. 12:302(K). 7. What legal limits are imposed on the amount of interest which may be charged on a loan secured by real property? The general rule for all loans is that conventional interest cannot exceed twelve (12%) percent per annum. La. R.S. 9:3500.C.(1). The general rule does not apply to loans for commercial or business purposes. In a transaction in which the mortgagee is the former owner of the property securing the loan, the interest rate cannot exceed seventeen (17%) percent. La. R.S. 9:3504.E. Loans secured by a mortgage on real property and guaranteed by the Veterans Administration (VA) or insured by the Federal Housing Administration (FHA) may bear such rate of interest as the parties agree upon in writing within the maximum limitations permitted under regulations promulgated from time to time by the VA or the FHA. La. R.S. 9:3504.A. Certain corporations, limited liability companies, partnerships in commendam, registered limited liability companies or partnerships, or any other person or individual borrowing funds for commercial, business, or agricultural purposes, may agree to pay interest in excess of the maximum rate of conventional interest, whether in connection with secured or unsecured indebtedness, and cannot assert usury as a defense to such agreement. La. R.S. 9:3509.A. and 12:703. Consumers who contract for a federally related mortgage loan may agree to pay fees and interest in excess of the maximum amounts authorized by the laws of this state and in doing so are prevented from asserting a claim or defense of usury. La. R.S. 6:1096. 8. Describe any laws that restrict the ability to make a borrower or guarantor personally liable for indebtedness secured by real property. None.