HOEPA Requirements

HOEPA, the Home Ownership and Equity Protection Act, has some new requirements that came into effect this year. This law applies to “high-cost” mortgages and home equity loans.   It is designed to prevent unfair and deceptive practices, and is an amendment to buy cialis online the Truth in Lending Act (TILA).

Loans covered by HOEPA

  • Any loans that are secured by a consumer’s principal dwelling, including mortgages, refinances, closed-end home equity loans, and HELOCs (Home Equity Lines of Credit) that meet other HEOPA criteria.
  • Mortgages with APRs more than 6.5% higher than the APOR (Average Prime Offer Rate).
  • 2nd mortgages with APRs more than 8.5% higher than the APOR.
  • Loans with total “points and fees” payable at or before closing equal to or greater than 5% of the total loan amount, if the loan is greater than $20,000.
  • Loans with total “points and fees” payable at or before closing equal to or greater than 8% of the total loan amount or $1,000, if the loan is less than $20,000.

Loans Exempt from HOEPA

  • Reverse mortgages, construction loans, HFA loans, and USDA Direct Loans.
  • Loans secured by 2nd homes.

HOEPA Requirements for Lenders

  • Lenders must offer written notice that the borrower may back out of the loan up to 3 business days after signing the loan agreement.
  • The lender must warn buyers that they may lose the home and any equity they build if they fail to pay their mortgage.
  • Lenders must disclose loan terms including amount borrowed, monthly payment amount, and APR.
  • Disclosure of the maximum monthly payment that could be demanded under a variable-rate loan.
  • Lenders must provide a list of homeownership counseling organizations to applicants within 3 days of accepting the application.
  • Lenders must confirm certain first-time borrowers receive homeownership counseling before completing the loan.

Prohibited by HOEPA

  • Certain balloon payments are prohibited.
  • Pre-payment penalties are prohibited.
  • Creditors may not recommend default on a loan before refinancing to a high-cost mortgage.
  • Fees for modifying a high-cost mortgage are forbidden.
  • Late fees greater than 4% of the past due payment are banned.
  • Lenders may not charge a fee for providing a payoff statement.
  • Financing points and fees with the rest of the mortgage loan is prohibited.
  • Structuring loans to avoid HOEPA coverage is forbidden.
  • Negative Amortization is banned in high-cost cialis over the counter mortgages.
  • Rate increases cialis online after default are prohibited.

There are many more rules and HOEPA requirements than can be listed here—the full text of the law is over 400 pages! The best thing consumers can do to understand all the requirements and protections the law offers is to schedule HOEPA Pre-purchase counseling with a HUD-approved housing counselor. We also offer HOEPA Lender Downloadable Quick Reference Guides on demand for borrowers, real estate professionals, and lenders.