A covered loan funds a $38,000 roof replacement and the lender wants to wire the money straight to the contractor. What payment methods does the covered-loan contractor-disbursement rule allow instead of a direct contractor payment?
Correct Answer
B) Pay by instrument to the consumer, jointly, or to an escrow agent instead
Proceeds of a covered loan may not go to a home improvement contractor except by an instrument payable to the consumer, jointly to consumer and contractor, or at the consumer's election to a third party escrow agent. Other choices: a direct wire is the practice the section closes; a completion notice does not change who the instrument is payable to; and splitting the payment does not address the form of it. Source: Cal. Fin. Code § 4973(f)
Why This Is the Correct Answer
Proceeds of a covered loan may not go to a home improvement contractor except by an instrument payable to the consumer, jointly to consumer and contractor, or at the consumer's election to a third party escrow agent. Other choices: a direct wire is the practice the section closes; a completion notice does not change who the instrument is payable to; and splitting the payment does not address the form of it. Source: Cal. Fin. Code § 4973(f)
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