What transactions are subject to HOEPA?
Under the 2013 HOEPA rule, most types of mortgage loans secured by a consumer's principal dwelling1, including purchase money mortgages, refinances, closed-end home-equity loans, and open-end credit plans (i.e., home equity lines of credit (HELOCs), are potentially subject to HOEPA coverage.
Are mortgages on certain property types exempt from HOEPA coverage? As discussed above, HOEPA applies to most types of consumer credit transactions secured by a consumer's principal dwelling. As a result, mortgages secured by vacation or second homes are not covered.
A loan is considered high-cost if the transaction's annual percentage rate (APR) exceeds the Average Prime Offer Rate (APOR) for comparable transactions on that date more than: 6.5 percentage points for first-lien transaction.
For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2020 will be $21,980. The adjusted points-and-fees dollar trigger for high-cost mortgages in 2020 will be $1,099.
The law does not apply to mortgage transactions that involve investment properties, commercial real estate or real estate purchases. HOEPA's high-cost provisions apply to a mortgage when either the interest rate or the costs exceed a certain level or trigger point.
Mortgages secured by manufactured housing (whether titled as real property or personal property) and other types of personal property (e.g., an RV or a houseboat) are subject to HOEPA coverage if the dwelling is the consumer's principal dwelling.
Which of the following is not a threshold that the Home Ownership Equity Protection Act (HOEPA) has established to identify loans as high-cost mortgages? The answer is subprime interest rate threshold. HOEPA uses APR, points and fees, and prepayment penalty thresholds to identify high-cost mortgages.
Which of the following statements describes a lending practice that is prohibited by HOEPA and its implementing regulations? making a lending decision based solely on the amount of equity in a loan applicant's home.
Which is NOT a trigger used to define a high cost loan under the Home Ownership and Equity Protection Act (HOEPA)? Although prepayment penalties are generally prohibited by HOEPA, the prepayment penalty is not one of the triggers used to identify a high cost loan.
What are the HOEPA Triggers? - Mortgage Math (NMLS Test Tips)
What triggers a high-cost mortgage?
Under the new rule, a mortgage will be considered high-cost if it is: A first mortgage with an annual percentage rate (APR) that is more than 6.5 percentage points higher than the average prime offer rate.
The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.
For 2020, the total loan amount threshold will be increased to $21,980 and the adjusted points and fees must exceed 5% of the total loan amount. Loans below $21,980 will also be considered a high-cost transaction if the points and fees exceed the lesser of 8% of the total loan amount or $1,099.
An HPML does not include a second home or Investment Property. A first-lien Mortgage secured by a Primary Residence that has an annual percentage rate (APR) of 1.5% or more above the average prime offer rate (APOR) for a comparable transaction as of the rate lock date.
- reverse mortgages;
- construction loans financing the initial construction of a new dwelling;
- loans originated and financed by a Housing Finance Agency; and.
- U.S. Department of Agriculture Rural Development Section 502 direct loans. [12 CFR §1026.32(a)(2)]
Which of the following statements accurately describes the scope of HOEPA? The answer is the provisions of HOEPA apply to first- and subordinate-lien transactions that are secured by a borrower's principal residence.
The § 1026.34(a)(4) prohibition against making loans without regard to consumers' repayment ability applies to open-end, high-cost mortgages.
The Home Ownership and Equity Protection Act (HOEPA), as implemented by Federal Reserve Regulation Z, Section 32, imposes additional disclosure requirements on these types of loans and prohibits certain acts and practices in connection with mortgage lending.
Penalties. The borrower has a right to sue the lender if they violate HOEPA requirements. The lawsuit will give the borrower right to recover actual and statutory damages, court costs and attorney fees. According to the law, violation of TILA's high-fee/cost requirements can empower the borrower to cancel the loan.
You must own your home outright or have at least 50% equity in your home to be eligible for a reverse mortgage loan. Even if you owe some money on your existing mortgage, you may be eligible for a reverse mortgage.
Is the charm booklet required on investment property?
On June 4, 2020, the Consumer Financial Protection Bureau (CFPB) issued a notice of availability concerning the Consumer Handbook on Adjustable Rate Mortgages (CHARM) booklet. The CHARM booklet is required by the Real Estate Settlement Procedures Act and the Truth in Lending Act.
pursuant to certain programs, certain nonprofit creditors, and mortgage loans made in connection with certain Federal emergency economic stabilization programs are exempt from ability to repay requirements.
Which of the following is permitted when servicing or originating a HOEPA loan? Answer: c) HOEPA loans may include pre-payment penalties as long as the pre-payment penalty occurs within the first five years (other conditions also apply). Increasing the rate after default is never permitted.
High-cost mortgages must meet the same three requirements that pertain to higher-priced mortgages, but in addition to these, the following conditions apply, among others: no balloon payment is allowed; the creditor cannot recommend default; the maximum allowed late fee is 4 percent of the past-due payment; points and ...
Taxes and insurance must be escrowed and paid along with the loan's principal and interest payment for at least 5 years; No loan modification or extension fees can be charged; No negative amortization is allowed.
Which of the following terms is allowed in a high-cost mortgage? The answer is a variable interest rate. High-cost mortgages are permitted to have a variable interest rate, however, negative amortization, advanced payments, and prepayment penalties are not allowed.
Under the 2013 HOEPA rule, most types of mortgage loans secured by a consumer's principal dwelling1, including purchase money mortgages, refinances, closed-end home-equity loans, and open-end credit plans (i.e., home equity lines of credit (HELOCs), are potentially subject to HOEPA coverage.
- The APR documentation.
- Regular payable amount (including balloon payments)
- Total loan amount.
- If a variable loan, then lender must disclose the exact rate and monthly payments.
- Maximum monthly payments.
Not covered under HOEPA
New Mortgages to purchase a home. Reverse Mortgages. Home Equity Lines of Credit.
For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2020 will be $21,980. The adjusted points-and-fees dollar trigger for high-cost mortgages in 2020 will be $1,099.
What is the threshold for points and fees allowed before a loan is considered a high-cost loan?
Points and Fees Test
A mortgage is also considered to be a high-cost mortgage if its points and fees exceed: 5% of the total loan amount if the loan amount is equal to or more than $22,969 (2022), or. 8% of the total loan amount or $1,148 (whichever is less) if the loan amount is less than $22,969.
In the final rule, the CFPB increased these limits for 2022 to the following: For a loan amount greater than or equal to $114,847, points and fees may not exceed 3 percent of the total loan amount. For a loan amount greater than or equal to $68,908 but less than $114,847, points and fees may not exceed $3,445.
A covered loan includes a consumer loan secured by real property where the loan exceeds a specified annual percentage rate or a certain percentage of points and fees, as specified.
The answer is A and V. The “A” and the “V” prefixes indicate the zones in which flood insurance is mandatory. In zone “D,” flood insurance is available if a homeowner chooses it, but no other zones require flood insurance. The answer is no later than four business days prior to consummation.
