Cheatsheet: Mortgage Brokerage, Disclosures & Hard Money

Broker vs. Banker

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MLDS Requirements (Real Property Loan Law)

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RPLL Commission Caps

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TRID Timeline

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Right of Rescission (TILA)

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Usury Quick Rules

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• Civil usury: Lender loses ALL interest; borrower recovers all interest paid

• Criminal usury: >2× legal rate with intent = up to 1 year in county jail

Hard Money Loan Quick Facts

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Mortgage Broker	Mortgage Banker
Funds loans?	NO — arranges only	YES — own capital
License	DRE license + NMLS endorsement	DFPI license or DRE
Earns	Origination/broker fee	Origination + servicing
Sells to secondary market?	No	Often yes
Loan Type	Threshold	Timing
First Trust Deed	Under $30,000	Within 3 business days of application
Second Trust Deed	Under $20,000	Within 3 business days of application
Loan Term	Max Commission (First TD)	Max Commission (Second TD)
< 2 years	5%	5%
2–3 years	10%	10%
≥ 3 years	15%	15%
Event	Form	Deadline
Complete application received	Loan Estimate	Within 3 business days
Before closing	Closing Disclosure	At least 3 business days before closing
Applies to	Does NOT apply to
Refinances of primary residence	Purchase money first mortgages
HELOCs on primary residence	Investment property loans
Second mortgages on primary	Commercial loans
Duration: 3 business days
Lender fails to provide 2 copies → rescission period extends to 3 YEARS
Party	Usury Cap Applies?	Notes
Non-exempt private lender	YES — 10% max	Consumer/personal loans
Licensed RE Broker arranging RE loan	EXEMPT	No cap — any rate legal
Banks/credit unions	Exempt	Federal preemption
Seller carryback	Exempt	Seller financing always exempt
CFL-licensed lenders	Exempt
Parameter	Typical
Interest rate	9–15% annually
Points (origination)	2–5 points
Term	12–24 months
LTV maximum	65–75% of ARV
Amortization	Interest-only + balloon
Borrowers	Fix-and-flip, developers, credit-challenged, speed closings
Legal?	YES when arranged by licensed CA RE broker

Key Formulas

`` LTV = Loan Amount ÷ Property Value Maximum Loan = Property Value × LTV% ARV = After Repair Value (estimated post-renovation market value) Points Cost = Loan Amount × Points% Annual Interest = Loan Amount × Rate% Total Hard Money Cost = Annual Interest + Points ``

Dodd-Frank Key Rules

• ATR Rule: Lenders must verify borrower's ability to repay before originating

• QM (Qualified Mortgage): Safe harbor; max 43% DTI, no negative amortization, no balloon (usually), max 30 years, fees ≤3%

• Loan Originator Comp: Cannot vary based on loan terms (rate, fees) — only loan amount

• Yield Spread Premium: Effectively prohibited for residential loans

• RESPA §8: No kickbacks for referrals on federally related mortgage loans