A covered loan of $300,000 carries a penalty inside the first 3 years. The borrower prepays $84,000 in one 12-month period. Assuming the penalty otherwise satisfies applicable requirements, what amount of the prepayment is subject to the statutory six-month-interest cap?
Correct Answer
A) The penalty may reach 6 months advance interest on the $24,000 excess
The cap is 6 months of advance interest at the contract rate on the amount prepaid in a 12-month period in excess of 20 percent of the original principal, and 20 percent of $300,000 is $60,000, leaving $24,000 exposed. Other choices: charging on the whole amount ignores the 20 percent allowance; 12 months is not the figure; and penalties inside the window are permitted on conditions rather than barred. Source: Cal. Fin. Code § 4973(a)(2)
Why This Is the Correct Answer
The cap is 6 months of advance interest at the contract rate on the amount prepaid in a 12-month period in excess of 20 percent of the original principal, and 20 percent of $300,000 is $60,000, leaving $24,000 exposed. Other choices: charging on the whole amount ignores the 20 percent allowance; 12 months is not the figure; and penalties inside the window are permitted on conditions rather than barred. Source: Cal. Fin. Code § 4973(a)(2)
More UST Questions
A Washington broker provides the federal settlement service estimates and booklet in 2026 and no separate state itemization. Can disclosures compliant with RESPA and Regulation X satisfy the state third-party itemization subsection?
Priya is comparing pre-license education providers before applying for a Florida mortgage loan originator license. How many hours of approved pre-license education must she complete in total?
An applicant is budgeting for a Florida MLO license and asks what the state application fee comes to at filing. Which figure is correct?
A newly sponsored Florida MLO is told she must buy an individual surety bond in her own name before she can originate. Is that correct?
A Washington consumer loan act licensee also brokers loans in 2026 outside the authority of that act. Does the consumer-loan-act exemption extend to mortgage brokerage outside that act’s authority?
A $200,000 Texas home equity loan has $3,700 in fees subject to the constitutional cap and a separate $600 fee for an appraisal performed by a third-party appraiser. Do the capped fees exceed the limit?
An owner applies for a Texas home equity loan on 4 May 2026 and the lender delivers the required notice on 8 May. Which date starts the constitutional 12-day waiting period for closing?
An owner closed a Texas home equity loan on 3 February 2026 and wants a second one on the same homestead in November 2026. Assuming no declared-emergency exception applies and the earlier home equity lien will be paid off, may the new loan close in November?
A Texas home equity loan forecloses and the sale leaves the lender $62,000 short of the balance owed. Absent actual fraud in obtaining the credit, may the lender recover the shortfall personally from the owner or spouse?
A Washington real estate broker helps a 2026 buyer arrange financing and takes only the usual sales commission. Does financing assistance incidental to a bona fide sale for only the customary real-estate commission fall within the exemption?
People Also Study
Federal Mortgage-Related Laws
24% of exam
General Mortgage Knowledge
20% of exam
Mortgage Loan Origination Activities
27% of exam
Ethics, Fraud & Consumer Protection
18% of exam