Overview

To engage in the business of mortgage lending in California, a lender must be licensed. California has three statutory frameworks under which lenders may be licensed. Companies should choose the licensing option that best suits their company's individual business plan. The three licensing options are:

1. A real estate broker license issued under the Real Estate Law by the California Department of Real Estate (DRE)
2. A finance lender's license issued under the Finance Lenders Law by the California Department of Corporations (DOC). Brokers licensed under this law may only broker loans to lenders that hold a California Finance Lenders license.
3. A residential mortgage lender's license issued under the Residential Mortgage Lending Act (RMLA) by the DOC Real estate brokers may make any kind of loan secured by real property. Finance lenders may make real estate secured loans with an initial principal balance of $5,000 or more. Residential mortgage lenders may make only federally related mortgage loans (as defined in Regulation X) In other words, a residential mortgage lender may make only first and second lien mortgage loans secured by one to four unit residential dwellings, condominiums, cooperatives, and certain manufactured housing. They may not make construction or commercial loans. Loans made under any of these three license frameworks are exempt from California's usury law.

• A three-hour course in ethics, professional conduct, and legal aspects of real estate, which shall include, but not be limited to, relevant legislation, regulations, articles, reports, studies, court decisions, treatises, and information of current interest.
• A three-hour course in agency relationships and duties in a real estate brokerage practice, including instruction in the disclosures to be made and the confidences to be kept in the various agency relationships between licensees and the parties to real estate transactions.
• A three-hour course in trust fund accounting and handling.
• A three-hour course in fair housing.
• A three-hour course in risk management that shall include, but need not be limited to, principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities.
• Not less than 18 clock hours of courses or programs related to consumer protection, and designated by the commissioner as satisfying this purpose in his or her approval of the offering of these courses or programs.
• Other courses and programs that will enable a licensee to achieve a high level of competence in serving the objectives of consumers who may engage the services of licensees to secure the transfer, financing, or similar objectives with respect to real property, including organizational and management techniques that will significantly contribute to this goal.

1. is secured by real property improved by a one-to-four residential unit that serves as the principal dwelling of the consumer;
2. has an original principal balance that does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association and
   
3. exceeds either of the following thresholds:
   1. The APR at loan consummation exceeds the yield on Treasury securities having comparable periods of maturity by more than eight percentage points.
   2. The total "points and fees" payable by the consumer at or before closing will exceed six percent of the loan amount. Points and fees include the following items:
      1. All items required to be disclosed as finance charges under Regulation Z, including the official staff commentary, as amended from time to time, except interest.
      2. All compensation and fees paid to mortgage brokers in connection with the loan transaction (the Department of Corporations issued a release on February 17, 2006 stating that the department will not include back end fees in the points and fees test when enforcing the Covered Loan Law).
      3. All items listed under Regulation Z, only if the person originating the loan receives direct compensation in connection with the charge.