In 1979 New Jersey had a usury law that limited the interest rate on conventiona
ID: 1205156 • Letter: I
Question
In 1979 New Jersey had a usury law that limited the interest rate on conventionally financed mortgages for properties located in New Jersey to a maximum of 9.5 percent. (Inflation rates were high at the time.) The usury ceiling was more restrictive than the one in the state of New York across the Hudson River from New Jersey.
a. Recognizing that people who work in New York City can choose to live in the suburbs located in either New Jersey or New York, what effect does the more restrictive usury ceiling in New York suburbs?
b. Which borrowers in particular might be affected by the New Jersey law, and how?
Explanation / Answer
Answer a)The popul;ation who work in New York City would prefer to live in suburbs of New York as in New Jersey the mortgage rates are high ,thus incresing their cost.
Answer b)The costs and risks associated with the lending of small amounts to poor credit risks goes high ,thus it tutnsto be non attractive.Thus small borrowers will be affected more as rates would be high for small amount and also non readiness to lending would be another obstacle.