HOEPA/part of TILA

HOEPA/part of TILA

1. Home Ownership and Equity Protection Act

   • Sometimes referred to as Section 32 loans
     • Exempt from the provisions of HOEPA
       • Reverse Mortgage Loans, Loans used to finance the initial construction of a dwelling, Loans originated by a housing finance agency is the creditor, Loans originated by the USDA
     • HOEPA also regulates Appraisal Practices

2. Applies to High-Cost Mortgages

   • APR Threshold, which differs for first-lien and sobordinate-lien mortgages
     • A points and fees threshold
       • A prepayment penalty threshold
       • Above the average prime offer rate for a comparable transaction
       • Thresholds for loans of $20,391 or more: The threshold is triggered if the points and fees exceed 5% of the loan amount
         • Threshold for loans of less than @20,391: The threshold is triggered if the points and fees exceed the lesser of 8% of the total loan amoun or $1,020
     • First-lien mortgages: A first lein home loan is a high cost mortgage if APR is 6.5
     • a subordinate-lien mortgages: a subordinate-lien home loan is a high-cost mortgage if its APR is 8.5 percentage points above the average prime offer rate for a comparable transaction

3. Special HOEPA disclosure, HOEPA loans must include a special disclosure that states: You are not required to complete this agreement merely because you have received these disclosures or have signed a loan application. If you obtain this loan, the lender will have a mortgage on your home. You could use your home, and any money you have put into it, if you do not meet your obligations under the loan.

   • Recipients fo the disclosure: Any consumer who is primarily liable on the obligation, Those with a right to rescind the transaction
     • Due 3 business days prior to the comsummation
   • Consumers must complete counseling with a HUD approved counselor, creditors are allowed to pay counseling fees

4. Ability to Repay Rule is required to comply with HOEPA

   • For open ended loans there is a presumption of complience

5. Prohibited Lending Terms: Ballon Payments, Negative amortization, advance payments, increased interest rates after default, Improperly calculated rebates, prepayment penalties, acceleration of debt

   • Prohibited lending practices: Direct payments to home improvement contractors, loan flipping, financing points and fees, lending without regard to repayment ability, lending without pre-loan counseling, and recommending default, charging loan modification or dererral fees, charging late fees, and charging fees for payoff statements