What is Hoepa?
The Homeownership and Stock Protection Act (HOEPA) is an amendment to the Consumer Protection Loan Act (TILA) in 1994. Predatory mortgage lending. The law requires certain protections for “high-cost mortgage” borrowers. interest rateusually provided to people with relatively low credit scores.
The history of Hoepa
Hoepa was created in 1994 and in the next decade there was a significant increase in uncrude lending practices, subprime and alternative mortgages. All of this led to the 2006-7 financial crisis and the 2007-09 Great Recession.
In response, Hoepa was expanded in 2010 under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Includes extensions:
- Apply hoepa to buy mortgage and helock, as well as refinance and Home Equity Loan
- Lower the loan threshold FeePoints and fee loans must be considered high cost and new thresholds must be added based on prepayment penalties
- Allows home buyers to receive pre-purchase counseling for high-cost loans
- Prohibited Balloon payment
These changes have resulted in more loans being classified as high-cost mortgages.
Which mortgage types does Hoepa cover?
Hoepa generally covers the following loan types if it is a major residence:
Hoepa usually does not apply to:
What do you classify as a high-cost mortgage?
Hoepa defines a “high-cost mortgage” as:
- The APR exceeds the average prime offer rate for comparable transactions of 6.5% points or more on a primary mortgage or a primary mortgage refinance, which is an 8.5% point on a primary mortgage or a lower lien.
- Related points and fees exceed certain thresholds. 5% of the loan amount.
The Consumer Financial Protection Agency amends the minimum limit on total points and fees each year, based on the current Consumer Price Index (CPI).
Hoepa rules and regulations
Hoepa has several regulations, including:
- Evaluation of borrowers’ repayment ability: Before issuing a high-cost mortgage, mortgage lenders should thoroughly consider the borrower’s finances, including their credit history, income, assets and obligations, so that they can pay off the loan.
- Conditional Limitations: The law restricts balloon payments Sales deadline clause In most circumstances, lenders are prohibited from requesting Prepaid penalty. Also, among other restrictions, there is a limit to late fees.
- Disclosure: At least three days before the mortgage closes, lenders Written Disclosure For borrowers who explain the details of the loan, including APRs, monthly payments, and default results.
- counseling: The borrower must be approved before closing Homeownership Counseling This covers budgeting and affordable prices as well as disclosure.
With these rules, Hoepa aims to limit the fees and fees charged to poor credit borrowers. And if the borrower doubts their rights under Hoepa, they can report the lender and cancel the loan.
Other borrower protections apply to high-cost mortgages
Regulation Z, a component of Tira, can mention that the two can be exchangeable, but requires that mortgage lenders provide certain disclosures before issuing the loan. Borrowers must receive one cost and cost breakdown when applying for a loan and receive a second final list at least three days before closing. This practice allows borrowers to compare final conditions Close disclosure First Loan estimate.
Regulation z It also prohibits borrowers from receiving compensation by entrusting borrowers to lenders to borrowers to provide more coverage for loan officers.
