Legal Question in Real Estate Law in California

Loans made or arranged by real estate brokers are exempt from the usury limits under California law. The term made or arranged has a legal meaning, as interpreted by case law.

But if you are going to loan money, secured by a deed of trust, I suggest you speak to a competent real estate attorney, because your transaction may have other implications other than usury. A real estate broker can't give you legal advice, but a lawyer can.

Under the current interest rate environment 10% is your cap whether you use a broker or not. Broker transactions are not exempt from usery law, they just have a different rule. The cap is the higher of 10% OR the S.F. Federal Reserve discount rate plus 5%. Since the discount rate has been 0.75% since 2010, that would allow only 6.75% as the alternative to the 10% cap. So 10% is the cap. So you gain no interest rate benefit from going through a broker at this time. Whether you use a broker or not, however, I strongly recommend using a professional escrow company and requiring the borrower to buy a lender's title insurance policy on your belalf as part of the closing.