The Home Ownership and Equity Protection Act

In 1994 Congress amended TILA to protect consumers from a number of “predatory” lending practices associated with high-cost loans. HOEPA is enforced by the FTC.

Loans Subject to Section 32 - HOEPA covers closed-end home equity loans and refinance mortgages that meet certain interest rate and points/fee triggers.

Interest Rate Trigger

1. For 1st lien mortgages the rate trigger is 8 percentage points above the rate of Treasury securities with a comparable maturity.
2. For 2nd or subordinate liens, the rate trigger is 10 percentage points.

Points and Fees Trigger

A loan is classified as high-cost if 8% or more of the loan amount (or $510—adjusted annually for 2005) is charged for loan related fees. Points and fees include loan points, mortgage broker fees, loan service fees, fees of a required closing agent, premiums for mortgage insurance, and debt protection fees.

Title examination fees, title insurance fees, document preparation fees, costs for appraisals, and pest inspections are not included if they are reasonable, if the creditor does not get direct or indirect compensation for the charge, and if the charge is not paid to an affiliate of the creditor. Interest and the time-price differentials are not included in calculating the amount of points and fees.