Under DFPI CFL guidance, when may a CFL loan be secured by real property?
Correct Answer
C) When the bona fide principal amount is more than $5,000
DFPI CFL guidance states that a CFL loan may not be secured by real property unless the bona fide principal amount is more than $5,000. The legacy item incorrectly framed $5,000 as a minimum amount that itself requires a CFL license.
Why This Is the Correct Answer
DFPI CFL guidance states that a CFL loan may not be secured by real property unless the bona fide principal amount is more than $5,000. The legacy item incorrectly framed $5,000 as a minimum amount that itself requires a CFL license.
Why the Other Options Are Wrong
Option A: Only when the loan is exactly $2,500
$2,500 is below the actual threshold. The CFL covers loans up to $5,000, not $2,500.
Option B: Only when the borrower is purchasing commercial real estate
$10,000 exceeds the CFL threshold. The actual cutoff is $5,000.
Option D: Never; CFL loans may not be secured by real property
$25,000 is far above the CFL threshold and would fall under CRMLA jurisdiction.
Memory Technique
CA -> ca-cfl-finance-lenders-brokers-licensing-records-reports
Exam Tip
CFL questions often test whether the person is lending, brokering, doing MLO activity, using a branch, meeting residential mortgage net worth and bond requirements, keeping records, filing reports, or facing DFPI examination/enforcement authority.
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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