Under the California Finance Lenders Law, a licensed lender wants to charge a borrower for a credit report that costs $25, an appraisal that costs $400, and an origination fee of $2,000 on a $100,000 loan. Which of these charges would be included in the calculation of points and fees for predatory lending purposes?
Correct Answer
B) Only the origination fee
Under California's predatory lending law, points and fees calculations exclude bona fide third-party charges like credit reports and appraisals. Only the origination fee would be included in the points and fees calculation.
Why This Is the Correct Answer
Under California's predatory lending law, points and fees calculations exclude bona fide third-party charges like credit reports and appraisals. Only the origination fee would be included in the points and fees calculation.
Why the Other Options Are Wrong
Option A: All charges: credit report, appraisal, and origination fee
Incorrect because credit reports and appraisals are bona fide third-party charges that are specifically excluded from points and fees calculations under California's predatory lending provisions.
Option C: Only the origination fee and credit report
Wrong because credit reports are legitimate third-party expenses excluded from the calculation, even though they involve a cost to the borrower.
Option D: The credit report and appraisal charges, but not the origination fee
Incorrect because appraisals are bona fide third-party services excluded from points and fees calculations, regardless of their cost.
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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