Which of the following entities is EXEMPT from California's constitutional usury limits under Article XV?
Correct Answer
A) A California-licensed real estate broker arranging a loan secured by real property
Article XV of the California Constitution specifically exempts loans made or arranged by licensed real estate brokers when secured by real property. This exemption allows broker-arranged loans to carry interest rates above the constitutional usury ceiling.
Why This Is the Correct Answer
Article XV of the California Constitution specifically exempts loans made or arranged by licensed real estate brokers when secured by real property. This exemption allows broker-arranged loans to carry interest rates above the constitutional usury ceiling.
Why the Other Options Are Wrong
Option B: A private individual lending personal funds
Private individuals lending personal funds are the primary parties subject to usury limits since they lack the regulatory exemption granted to licensed entities.
Option C: A seller carrying back a purchase money note on personal property
Sellers carrying back notes on personal property (not real property) are not covered by the real property broker exemption and may be subject to usury limits.
Option D: An unlicensed mortgage company
An unlicensed mortgage company has no exemption; licensing is the key requirement for usury exemption under California law.
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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