A California MLO is advising a private investor who wants to fund a loan at 11% interest. The loan will be secured by vacant land. No broker is involved. The current SF Federal Reserve discount rate is 4%. What should the MLO advise?
Correct Answer
D) The rate is usurious because it exceeds the 10% ceiling and no exemption applies
The usury ceiling is MAX(10%, 5%+4%=9%) = 10%. The 11% rate exceeds 10%. The private investor is not an exempt lender, no broker is arranging the loan, and vacant land security alone does not create an exemption. The loan is usurious.
Why This Is the Correct Answer
The usury ceiling is MAX(10%, 5%+4%=9%) = 10%. The 11% rate exceeds 10%. The private investor is not an exempt lender, no broker is arranging the loan, and vacant land security alone does not create an exemption. The loan is usurious.
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