An assignee who purchases a California covered loan is:
Correct Answer
A) Subject to all claims and defenses the borrower could assert against the original lender
California's predatory lending law provides for assignee liability, meaning purchasers of covered loans inherit the borrower's claims and defenses against the original lender.
Why This Is the Correct Answer
California's predatory lending law provides for assignee liability, meaning purchasers of covered loans inherit the borrower's claims and defenses against the original lender.
Why the Other Options Are Wrong
Option B: Completely shielded from borrower claims
Assignees are not shielded. They inherit the borrower's claims against the original lender.
Option C: Liable only for their own actions, not the originator's
Assignee liability extends beyond the assignee's own actions to include the original lender's violations.
Option D: Protected if they conducted due diligence
Due diligence does not provide a defense against assignee liability under California's covered loan provisions.
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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