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
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