If you decide to take out a "high-cost home mortgage," a kind of loan where the interest rate or fees exceed certain amounts, the Home Ownership and Equity Protection Act HOEPA provides you with protections against abusive lending practices by restricting loan terms and features.
The law also provides enhanced remedies for violations in a private civil action. Read on to learn more about HOEPA and the protections for borrowers considering getting this type of mortgage loan. The goal of HOEPA was to stop abusive practices in refinances and closed-end home equity loans that had high interest rates or high fees. Under HOEPA as originally passed, if a refinance or home equity mortgage loan met any of HOEPA's high-cost coverage tests, the lender was required to provide special disclosures to borrowers and was subject to various restrictions on the loan terms.
HOEPA provides certain protections for borrowers if they take out a high-cost mortgage. A loan is considered high-cost if the borrower's principal dwelling secures the loan and one of the following is true:.
You can determine if a transaction is a high-cost mortgage based on its APR. A loan is considered a high-cost mortgage if its APR as of the date the interest rate is set exceeds the Average Prime Offer Rate an annual percentage rate that is derived from average interest rates, points, and other loan pricing terms for a comparable transaction on that date by more than:. A mortgage is also considered to be a high-cost mortgage if its points and fees exceed:.
Before providing a high-cost mortgage, a lender must ensure that the borrower receives counseling on the advisability of such a mortgage from a HUD-approved counselor or a state housing finance authority. For example, TILA's remedies in a civil action for a HOEPA violation can include a refund of the finance charges and fees paid, statutory damages, court costs, and attorneys' fees.
Also, be aware that additional steps are often required in the foreclosure of a high-cost home loan. To find out if your state has any laws that affect the foreclosure of a high-cost home loan, talk to a foreclosure lawyer. The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site.
The attorney listings on this site are paid attorney advertising. Late fees are restricted to 4 percent of the past due payment and pyramiding pf late fees is prohibited. Fees for generation of payoff statements are generally banned, with limited exceptions. Points and fees cannot be financed, excluding finance closing charges. Lender must receive written certification that the consumer has received homeownership counseling from an agency on the HUD-approved housing counseling list found at consumerfinance.
The homeownership counselor cannot be affiliated with or employed by the lender. Lenders cannot steer the consumer to a particular counseling agency.
The homeowner counseling organization list must contain:. Counseling cannot begin until the consumer has received their RESPA loan estimate or the disclosures required, which will be verified with the counselor. High-cost mortgage disclosures are required to be provided at least 3 business days before closing. Counseling may be provided via telephone. Written certificate may be sent by counselor via mail, email or facsimile so long as the certificate is in retainable form.
Lenders may pay the counseling fee, but cannot condition payment on the consumer getting a high-cost loan. Consumers may also pay the counseling fee. All the key compliance information you need to know is condensed into this short outline for quick reading. The rate-based trigger is lowered by 2 percentage points for first-lien mortgage loans.
The fee-based trigger is revised to include the cost of optional credit insurance and similar debt protection products paid at closing. Disclosures Creditors offering HOEPA loans must give special disclosures to borrowers at least three days before closing.
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