A private lender makes a 14% second mortgage on a California home. A licensed real estate broker negotiated it for a fee of $4,500. Does the compensated broker’s arrangement qualify the loan for the real-property broker exemption from usury limits?
Correct Answer
D) Exempt: a loan arranged by a licensed broker escapes the usury limits
Section 1916.1 exempts a loan made or arranged by a person licensed as a real estate broker and secured in whole or in part by a lien on real property, and arranging for compensation is what the broker did here. Other choices: the exemption is not confined to first liens; the lender need not be the broker, since arranging is enough; and a usury defense is not waivable by agreement. Source: Cal. Civ. Code § 1916.1
Why This Is the Correct Answer
Section 1916.1 exempts a loan made or arranged by a person licensed as a real estate broker and secured in whole or in part by a lien on real property, and arranging for compensation is what the broker did here. Other choices: the exemption is not confined to first liens; the lender need not be the broker, since arranging is enough; and a usury defense is not waivable by agreement. Source: Cal. Civ. Code § 1916.1
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