Covered Loan Law and Legal Definition

Covered loan means a consumer loan in which the original principal balance of the loan does not exceed the most current conforming loan limit for a single-family first mortgage loan established by the Federal National Mortgage Association in the case of a mortgage or deed of trust. For a consumer loan to be a covered loan any one of the following conditions must be met:

(1)the annual percentage rate at consummation of the transaction must exceed by more than eight percentage points the yield on treasury securities; or

(2)the total points and fees payable by the consumer at or before closing for a mortgage or deed of trust must exceed 6 percent of the total loan amount [Cal Fin Code § 4970 (b)].