What defines a high-cost loan?
A loan is considered high-cost if the borrower’s principal dwelling secures the loan and one of the following is true: The loan’s annual percentage rate (APR) exceeds a certain threshold. The amount of points and fees paid in connection with the transaction exceed a certain threshold.
What is the difference between Hopa and Hoepa?
We like to pronounce it “HoEPa” with emphasis on the “e” (not to be confused with HOPA which has to do with PMI). HOEPA applies to any loan made to a consumer which is secured by the consumer’s principal dwelling.
What defines a loan as being a higher-priced loan under the new high price mortgage loan HPML rule?
A higher-priced mortgage loan, or HPML, is a mortgage with an annual percentage rate (APR) that’s higher than the average prime offer rate (APOR) provided to well-qualified borrowers. HPML loans typically come with higher interest rates, closing costs and monthly payments.
What law defines a high-cost loan also known as a Section 32 loan?
The Home Ownership and Equity Protection Act (HOEPA) of 1994 defines high-cost mortgages. These also are known as Section 32 mortgages because Section 32 of Regulation Z of the federal Truth in Lending Act implements the law.
Which regulation includes special requirements for high cost and higher priced mortgages?
High Cost mortgages are section 1026.32 –and they’re often known as “Section 32” mortgages. Higher Priced mortgages are in Regulation Z, section 1026.35.
What are the three tests used to determine whether or not a loan is a high cost mortgage?
As a reminder, there are 3 separate “tests” to determine HCM status (an APR test, a points & fees test and a prepayment penalty test) and if a loan meets the criteria of any one of the 3 tests, it is a HCM.
Can a high cost loan have a prepayment penalty?
Section 1026.32(a)(1)(iii) provides that a closed-end credit transaction or an open-end credit plan is a high-cost mortgage if, under the terms of the loan contract or open-end credit agreement, a creditor can charge either a prepayment penalty more than 36 months after consummation or account opening, or total …