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HOEPA Program

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HOEPA Pre-purchase Counseling

Based on recent amendments to the Home Ownership and Equity Protection Act (HOEPA), borrowers of certain types of mortgages are now required to complete pre-purchase housing counseling with a HUD-approved agency before closing the loan. As a nonprofit HUD-approved housing counseling agency, credit.org has compiled important information you need to know about the new regulations:

  • HOEPA Lender Guide
  • CFPB Compliance Guide
  • Downloadable Reference Guides

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HOEPA rules

The 2013 HOEPA Rule applies to loan applications received on or after January 10, 2014. To comply with high-cost mortgage provisions of this rule you must:

  • Give additional disclosures
  • Avoid certain loan terms
  • Ensure the consumer receives additional protections including homeownership counseling

Creditors must provide a list of homeownership counseling organizations within 3 days of application, and confirm that the consumer received homeownership counseling.

Loans Subject to HOEPA Coverage

  • Purchase-money mortgages
  • Refinances
  • Closed-end home equity loans
  • Open-end credit plans (i.e. HELOCs)

Loans Exempt from HOEPA Coverage

  • Reverse mortgages
  • Construction Loans (applies to only the initial construction of a new dwelling)
  • Loans originated and directly financed by Housing Finance Agency (HFA)
  • Loans originated under the U.S. Department of Agriculture (USDA’s) Rural Development Loan Program
  • Mortgages secured by vacation or second homes

How to Determine if a Loan is Considered a “High-Cost Mortgage”

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
  • 8.5 percentage points for first-lien that are for less than $50,000 & secured by personal property (i.e. houseboat, RVs)
  • 8.5 percentage points for junior-lien transactions

A loan is also determined to be high-cost by the amount of points & fees paid within the transaction, or by its prepayment penalties. The APOR is published at www.ffiec.gov/ratespread.

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