A California consumer loan of $410,000 secured by the borrower's home carries total points and fees of $26,650 payable at closing, which is 6.5% of the loan amount. Assuming the loan meets the other statutory scope requirements, does the points-and-fees amount trigger covered-loan status under California Financial Code section 4970?
Correct Answer
C) A covered loan: points and fees above 6% of the total loan amount trip it
Section 4970 makes a consumer loan a covered loan where the total points and fees payable at or before closing exceed 6 percent of the total loan amount, and 6.5% is over it. Other choices: 10 percent is not a figure the section uses, and it is what the bank being replaced taught; the rate trigger is an alternative rather than the only route; and either trigger is enough on its own, so the rate need not also be exceeded. Source: Cal. Fin. Code § 4970(b)
Why This Is the Correct Answer
Section 4970 makes a consumer loan a covered loan where the total points and fees payable at or before closing exceed 6 percent of the total loan amount, and 6.5% is over it. Other choices: 10 percent is not a figure the section uses, and it is what the bank being replaced taught; the rate trigger is an alternative rather than the only route; and either trigger is enough on its own, so the rate need not also be exceeded. Source: Cal. Fin. Code § 4970(b)
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