California Real Estate Practice Exam

A lender with vast funds for investment, who prefers larger loans without collection responsibilities, would most likely be a(n):

1. Commercial bank

2. Insurance company

3. Private lender

4. Savings bank

The correct answer is: Insurance company

The lender described in the question prefers larger loans and does not want to take on collection responsibilities, which aligns well with the operations of an insurance company. Insurance companies often have substantial funds accumulated from premiums paid by policyholders, which they need to invest in various financial instruments, including real estate loans. They typically invest in larger loan amounts for commercial properties or development projects, which fits the profile of a lender looking for significant investments. Additionally, insurance companies often rely on third-party servicers to handle the collection process, thus relieving themselves of those responsibilities, which is another characteristic they share with the type of lender described. In contrast, commercial banks and savings banks usually engage in a broader range of lending activities that may include smaller, residential loans and often involve direct collection responsibilities. Private lenders often engage in more informal lending practices, and their funding levels and investment strategies can vary significantly, making them less likely to be categorized as lenders who prefer larger loans without collection obligations.