Question:

Shalom,

I took out a commercial mortgage from a bank on an investment property that I had purchased. I found out afterwards that this small bank is majority owned by a Jew. The bank does not intend to sell the mortgage to another bank and the loan was taken out by an LLC, but it has a personal guarantee from me. The terms of the loan are that it is a 20 year mortgage, but at year 5 it becomes due in full and requires to be refinanced (either at the same bank or another bank).

My first question is if there is any eitzah to keep the loan as is. If not, there is someone in the community who has a connection to the bank president who thinks he might be able to get them to sign a heter iska. If that is the case, would this Beis Din have an appropriate form that would be able to work reto-actively on the origination fees that I had already paid the bank.

Answer:

There is no way to make a heter iska retroactively, however it is possible to set up a heter iska in the form of a new loan from now, in a way that will minimize some the issur that was done. The halacha is interest that was paid that was ribbis d’orayso does not belong to the lender (the malveh) and it has to be returned to the person who borrower (the loveh).  The way to make a heter iska and a new loan at this point would be to make the heter iska that it should include the money that was paid as interest as if it was already paid as capital. For example, if you borrowed $100,000, and over the last two years you paid $10,000 in capital and $5,000 in interest. Since the interest has to be returned to you, therefore halachically you only owe $85,000. Understandably, since the owner of the company is not going to agree to forego the interest on the loan, therefore you can make a heter iska under the terms that the new “interest” under the heter iska will now be at a higher rate, to compensate for the smaller loan, so that at the end he will get the amount that would have been paid for the $100,000 loan. For example, let’s say that the loan was for $100,000 for ten years @ 5%, and the total amount that would be returned over time would be $150,000. You can make the heter iska on $85,000 6% which would come out that the mortgage company will get back the same amount of money as was agreed upon originally. This way you didn’t pay any interest, and all of the money coming to the bank will be paid to them.  Such an agreement would have to be calculated as to what the terms will be.

Note: I heard from Horav S. Felder shlit”a that the above arrangement will be valid as long as the interest rate that is going to be paid is not something that is exorbitant. This is because if it is so large that people don’t make such deals then it will invalidate the heter iska, because then it doesn’t look like a normal business deal.

Sources:

Horav Y. Cahen shlit”a

Tags: Heter Iska Interest Ribis

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2 Responses to “Retroactive Heter Iskah”

  1. Would you be able to provide me a form that I could use for this purpose?

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