b'Consumer Laws / Business Loans continued from page 11and is missed, the same procedures wouldfunds control party is able to manage theEndnotesapply to managing the late charge, and doinspections at the property as well.not cost exponentially more.Therefore,112 C.F.R. 1026 et seq.the 10% charge is not applicable to theC.CFL licensed lenders:212 C.F.R. 1024 et seq.principal amount to be repaid at that time. Borrower/Broker Statement 315 U.S.C.A.1601 et seq, 12 U.S.C.A.2601 et seq.2. LTV limitations California Finance Lenders do not have412 C.F.R. 1026.2 (a)(12)nearly as many restrictions on their loans512 C.F.R. 1026.3(a)(1); 12 C.F.R 1024.5(b)(2). California Business and Professions Codeas DRE licensed brokers.That being said, provides various loan-to-value (LTV)CFLs are restricted on the number of612 C.F.R. 1026.2 (a)(19)limitations for loans arranged by licensedbrokers they may pay out on a particular715 U.S.C.A.1691brokers.39These regulations are in placetransaction.A great way to ensure812 C.F.R.202.1 et seq.to protect the lenders interest, and whencompliance with this section is to include9Id.a broker decides to exceed such limitationsa Borrower/Broker Statement in the10 15 U.S.C.A.1691(e)(1)they must thoroughly document theloan document package which provides evidence for doing so.CFLs do not have thea summary of the loan terms and includes11Id.same restriction as they are the lender andany fees paid to any non-CFL parties. 1215 U.S.C.A.1691(e)(4)therefore able to competently determine13 15 U.S.C.A.1691(e)(2)for themselves whether the increased riskV. CONCLUSION 14 15 U.S.C.A.1691(a)(1)is worth it on that particular file. 15 15 U.S.C.A.1691(d)(6)The legal framework governing business 3. construction loans purpose loans is expansive and at times16 Id.difficult to navigate.While business1715 U.S.C.A.1691(d)Similar to the LTV limitations above, DREpurpose loans are exempt from two major18 Id.arranged loans have additional regulationsbodies of federal lending law, a multitude19 12 C.F.R. 1002.9(a)(3)(ii)(A).in place for construction loans when theof federal consumer laws still apply.20 12 U.S.C.A.2801LTV is based on the after-repaired-valueAccordingly, private lenders should adopt of the property AND there is a holdbackprocedures that comply with both state21 42 U.S.C.A.3603 to 3606, 3617.of loan proceeds.40If the holdback is lessand federal requirements.Private lenders22 42 U.S.C.A.3602(b)than $100,000.00, the following restrictionswith questions about compliance should23 42 U.S.C.A.3602(c)apply: (i) the lender must fully fund theconsult with an attorney versed in federal24 15 U.S.C.A.1681loan and may not net fund any part ofand state lending laws, who can provide25 Id.the proceeds; (ii) there must be an actualfurther expertise on these issues.appraisal done of the property completed26 Id.by a licensed appraiser, not a BPO or other27 15 U.S.C.A.1681(b)similar valuation; (iii) the loan documentsGeraci LLP is the nations largest law firm28 50 U.S.C.A.3901 must include specific instructions for whatwhich focuses on the representation of29 50 U.S.C.A.3902happens when there is a default undernon-conventional lenders.Victoria Wyatt the loan; (iv) there must be a detailedis a graduate of the University of California,30 50 U.S.C.A.3953draw schedule in place for administeringIrvine School of Law and will be joining31 50 U.S.C.A.3931the holdback; and (v) the loan amountthe firm as a full-time associate in the fall32 https://scra-w.dmdc.osd.mil/scra/#/home may not exceed $2,500,000.00, meaningof 2019.She can be reached at V.Wyatt@ 33 Cal. Civ. Code2954.9(b)loans for more than this amount shouldGeraciLLP.com.Melissa Martorella, Esq.,34 Cal. Civ. Code2948.5be split into a loan for the purchase priceis a senior Banking and Finance attorney and another for the construction.41Inwith the firm and focuses on representing35 Cal. Civ. Code2955.5addition to the previous restrictions, ifnationwide private lenders transact36 Cal. Health & Saf. Code35800, et. seq.the holdback is greater than $100,000.00throughout the country.She can be37 Cal. Bus. and Prof. Code10242.5there are two additional restrictions: (i) areached at M.Martorella@GeraciLLP.com.38 Id.third party funds control must be used toNema Daghbandan, Esq., is a partner39 Cal. Bus. & Prof. Code10232.3(a)administer the holdback, and (ii) licensedand the chair of the Banking and Finance parties must inspect the various workpractice group and advises nationwide40 Cal. Bus. & Prof. Code10232.3(a)(4) & (5)completed at the property throughout themortgage lenders on compliance and41 Id.disbursal process.42Often times the sametransactional matters.He can be reached42 Id.at Nema@GeraciLLP.com. Page 12Fall 2019Points of Interest'