{"data":{"id":"us-ca/fin-4995.2","jurisdiction":"us-ca","citation":"FIN § 4995.2","heading":"","body":"(a) This division shall apply to any licensed person who in bad faith attempts to avoid the application of this division by doing either of the following:\n(1) Dividing any loan transaction into separate parts for the purpose and with the intent of evading the provisions of this division.\n(2) Any other subterfuge.\n(b) Notwithstanding any other provision of law, a licensed person shall not make, or cause to be made, any false, deceptive, or misleading statement or representation in connection with a higher-priced mortgage loan.\n(c) A mortgage broker who arranges only higher-priced mortgage loans shall disclose that fact to a borrower, both orally and in writing, at the time of initially engaging in mortgage brokerage services with that borrower.\n(d) A mortgage broker who provides mortgage brokerage services shall not steer, counsel, or direct a borrower to accept a loan at a higher cost than that for which the borrower could qualify based upon the loans offered by the persons with whom the broker regularly does business.\n(e) (1) A mortgage broker who provides mortgage brokerage services for a borrower shall not receive compensation, including a yield spread premium, fee, commission, or any other compensation, for arranging a higher-priced mortgage loan with a prepayment penalty that exceeds the compensation that the mortgage broker would otherwise receive for arranging that higher-priced mortgage loan without a prepayment penalty.\n(2) When providing mortgage brokerage services for a borrower, a mortgage broker shall receive the same compensation for providing those services whether paid by the lender, borrower, or a third party.\n(f) No licensed person shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a higher-priced mortgage loan that refinances all or any portion of the existing loan or debt.\n(g) A licensed person shall not make a higher-priced mortgage loan that contains a provision for negative amortization. This subdivision shall not preclude a licensed person from entering into a subsequent agreement with a borrower to capitalize payments as a means of permitting a borrower to cure or prevent a delinquency.\n(h) A licensed person who makes a higher-priced mortgage loan and who, when acting in good faith, fails to comply with this section, shall not be liable if the licensed person establishes either of the following:\n(1) Within 90 days of the loan closing and prior to the institution of any action against the licensed person under this section, the licensed person did all of the following:\n(A) Notified the borrower of the compliance failure.\n(B) Tendered appropriate restitution.\n(C) Offered, at the borrower’s option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.\n(D) Within a reasonable period of time following the borrower’s election of remedies, took appropriate action based on the borrower’s choice.\n(2) (A) The compliance failure was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adopted to avoid those errors, and within 120 days after receipt of a complaint or the discovery of the compliance failure or the licensed person’s receipt of written notice of the compliance failure, the licensed person did all of the following:\n(i) Notified the borrower of the compliance failure.\n(ii) Tendered appropriate restitution.\n(iii) Offered, at the borrower’s option, either to make the higher-priced mortgage loan comply with the requirements of this division or change the terms of the loan in a manner beneficial to the borrower so that the loan will no longer be considered a higher-priced mortgage loan subject to the provisions of this division.\n(iv) Within a reasonable period of time following the borrower’s election of remedies, took appropriate action based on the borrower’s choice.\n(B) For purposes of this subdivision, examples of a bona fide error include clerical, calculation, computer malfunction and programming, and printing errors.","path":["Financial Code - FIN","DIVISION 1.10. HIGHER-PRICED MORTGAGE LOANS [4995. - 4995.6.]"],"source_url":"https://downloads.leginfo.legislature.ca.gov/pubinfo_2025.zip","current_through":"2026-09-13","vintage":"","retrieved_at":"2026-09-14T05:56:33Z","sha256":"40e9b5a83cccbde6cb29909eba38f9b7f05a70d2cca7c2bf1846edad1a7299dd","source_id":"us-ca","stale":false,"prev":"us-ca/fin-4995.1","next":"us-ca/fin-4995.3"},"notice":"GroundRules: Original legal text. Not legal advice."}