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Getting Ready for January: High-cost Mortgages and HOEPA Revisions
Wednesday, December 4, 2013 6:50 AM

Continuing with our review of the CFPB’s new rule changes in January, the CFPB’s has defined a category of what it calls “High-Cost” mortgages and a list of requirements that apply to lenders issuing those kinds of mortgages.

 A “high-cost” mortgage is a mortgage on which the:

  • Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) by
    • More than 6.5 percentage points for a first-lien transaction; or 8.5 percentage points for a first-lien transaction if the dwelling is personal property and the loan amount is less than $50,000; or
    • 8.5 percentage points for a subordinate-lien transaction
  • Total points and fees exceed:
    • 5 percent of the total loan amount for a loan of $20,000 or more; or
    • The lesser of 8 percent of the total loan amount or $1,000 for a loan of less than $20,000 (adjusted for inflation); or
  • Prepayment fees and penalties:
    • May be imposed more than 36 months after consummation, or
    • Can exceed, in total, more than 2 percent of the amount prepaid.

The final rule also lays out several new requirements, including home counseling obligations, ability to repay for high-cost mortgages, limitations on balloon payments, prohibitions on pre-payment penalties on high-cost mortgages, and the need for mortgage lenders to disclose any violations of the new rule within a certain period.  The rule also extends the statutory protection for HOEPA loans from only closed-end refinancings and home-equity mortgage loans, to include also high-cost mortgage loans that are residential mortgage transactions, such as purchase money mortgage loans, and open-end credit plans secured by the consumer’s principal dwelling.   

For CUNA’s rule analysis, click here. For the CFPB’s final rule discussion, including the Small Entity Compliance Guide, click here.

For any questions, please contact InfoCentral, at (512) 853-8515, or email