The Home Ownership and Equity Protection Act (HOEPA) of 1994 implemented by Reg Z prohibits certain acts and practices in connection with high cost “sub-prime” mortgage loans (“HOEPA loans”) and requires certain disclosures for HOEPA loans. In January 2013, HOEPA was amended to implement additional counseling requirements. On January 1, 2019 The Bureau of Consumer Financial Protection rules amending the regulation text and official interpretations went into effect.
A HOEPA loan is a loan secured by a first lien on the consumer’s principal dwelling that meets one of the three criteria and threshold set forth by the Consumer Financial Protection Bureau under its rule making authority there relate to APR, total points and fees and prepayment penalties.
The calculation form to determine whether a loan is a HOEPA loan is located at the end of this Chapter.
These loans are exempt from HOEPA requirements:
•Reverse Mortgages;
•Loans to finance the initial construction of a dwelling;
•Loans directly financed by a Housing Finance Agency as lender; and
•Loans directly financed through the Rural Service Section 502 Direct Loan Program
A creditor must provide a disclosure to consumers at least three business days prior to the consummation or account opening of a high-cost mortgage. The disclosure must be in writing and in a form the consumer may keep, and must:
•Inform the consumer that the loan will not be effective until consummation or account opening occurs;
•Explain the consequences of default;
•Disclose loan terms such as APR, amount borrowed, and monthly payment; and
•In the case of variable-rate loans, explain the maximum monthly payment that may be required under the terms of the loan or credit plan