A California mortgage broker is reviewing a $250,000 consumer mortgage secured by the borrower's principal dwelling. Which points-and-fees result would trigger California covered-loan status under Financial Code section 4970?
Correct Answer
B) Points and fees exceeding 6% of the total loan amount
California covered-loan status can be triggered when total points and fees payable by the consumer at or before closing exceed 6% of the total loan amount. For a $250,000 example, 6% is $15,000. The prior legacy percentage answer was wrong.
Why This Is the Correct Answer
Points and fees exceeding 6% of the total loan amount is correct. California covered-loan status can be triggered when total points and fees payable by the consumer at or before closing exceed 6% of the total loan amount. For a $250,000 example, 6% is $15,000. The prior legacy percentage answer was wrong. California covered-loan status can be triggered when total points and fees payable by the consumer at or before closing exceed 6% of the total loan amount. For a $250,000 example, 6% is $15,000. The prior legacy percentage answer was wrong.
Why the Other Options Are Wrong
Option A: Any points and fees, regardless of amount
California law specifically caps points and fees regardless of loan type, including refinance loans - there are no exemptions for refinances.
Option C: Points and fees exceeding 8% of the total loan amount
8% is significantly above the 5% limit and would constitute a clear violation of California's predatory lending law.
Option D: Only points and fees exceeding 10% of the total loan amount
This option does not match the current California official-source rule tested by the item.
Memory Technique
CA -> ca-covered-loans-high-cost-consumer-protections
Exam Tip
Covered-loan questions often test the 8-point APR trigger, 6 percent points-and-fees trigger, principal-dwelling scope, Consumer Caution notice timing, ATR, prepayment penalty limits, prohibited loan terms, and remedies.
Common Mistakes to Avoid
- -Using a national baseline answer when California has agency-specific DFPI or DRE requirements
- -Confusing CFL, CRMLA, covered-loan, usury, servicing, and DRE endorsement rules
- -Relying on legacy California state-exam or education assumptions instead of current NMLS source pages
More UST Questions
In a pricing desk question, an audit analyst sees facts tied to Prohibited Misrepresentation. What should the file reflect?
An applicant previously had an MLO license revoked by a state regulator. Under the SAFE Act minimum standards for a new state-licensed MLO license, which statement is correct?
Which statement correctly distinguishes a license suspension from a license revocation?
A state regulator has issued an order suspending an MLO's authority effective immediately. The MLO has filed an appeal, but no stay has been granted. What should the MLO do?
An MLO license application asks whether the applicant has been the subject of a regulatory order. The applicant has a recent consent order that falls within the question. What is the proper response?
Why does NMLS maintain licensing and enforcement information that participating regulators can access?
A regulator issues a final license suspension without giving the MLO notice of the alleged violation or any opportunity to respond, even though applicable law requires both. What issue is presented?
A regulator finds that an MLO charged consumers prohibited fees. Which set of actions is consistent with the enforcement tools contemplated by Regulation H?
An MLO's license status in NMLS changes to suspended, with no stay or reinstatement shown. What is the immediate operational effect?
Which fact most directly supports disciplinary action against an MLO rather than merely a request for additional application information?
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
Related Study Resources
Previous Question
A licensing coordinator handling an Indiana regulator exam preparation needs the compliant answer for continuing education and renewal. What should the reviewer choose?
Next Question
A file review in Michigan turns on pre-licensure education rather than a generic SAFE rule rather than a generic SAFE rule. Which statement controls?