A California real estate broker arranges a loan between a private investor and a borrower, secured by the borrower's primary residence. The interest rate is 14%. Is this loan usurious?
Correct Answer
C) No, because the real estate broker exemption applies to broker-arranged loans secured by real property
The real estate broker exemption under Article XV applies when a licensed real estate broker arranges a loan secured by real property. There is no distinction between residential and commercial property for this exemption, so the 14% rate is permissible.
Why This Is the Correct Answer
The real estate broker exemption under Article XV applies when a licensed real estate broker arranges a loan secured by real property. There is no distinction between residential and commercial property for this exemption, so the 14% rate is permissible.
Why the Other Options Are Wrong
Option A: Yes, because loans on primary residences cannot exceed 10%
There is no special 10% cap for primary residences under the broker exemption; the exemption removes the usury ceiling entirely for qualifying transactions.
Option B: Yes, because the broker exemption only applies to commercial property
The broker exemption applies to all real property, not just commercial property; residential property is equally covered.
Option D: No, because all loans secured by a primary residence are exempt from usury
Not all loans on primary residences are usury-exempt; the exemption requires broker involvement or an exempt institutional lender.
Memory Technique
CA -> ca-usury-real-estate-broker-exemptions-interest-penalties
Exam Tip
Usury questions require separating personal-purpose loans, other-use loans, regulated-lender exemptions, real estate broker arranged real-property loans, and nonexempt private-lender scenarios.
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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