What Is HOEPA Law?
HOEPA stands for Home Ownership and Equity Protection Act. Passed in 1994, the law extends the Truth In Lending Act passed in 1968. It deals with mortgage restrictions and requirements pertaining to high-cost loans. The law requires that HOEPA disclosures be given to the borrower at least three days prior to closing. Restrictions covered in the Act pertain to certain loan terms that are typically associated with abusive or predatory lending.
The following types of loans are covered under the HOEPA Law:
- APR on original mortgage is 8% points over comparable Treasury securities
- Or if the APR on the second mortgage is 10% or more over comparable Treasury securities
- The borrower’s total fees and points exceed $583 or 8% of the total loan amount, whichever is greater
That $583 is tied to the Consumer Price Index and established by the Federal Reserve Board annually so it’s only good for 2009. Next year the Board will adjust that figure.
The rules apply primarily to home equity installment loans or refinancing, which are typically high-cost loans.
HOEPA specifically prohibits balloon payments, negative amortization, default interest that exceeds pre-default rates, a variety of prepayment penalties, and several other controversial lender practices. You can learn more about HOEPA here.
To find out if a lender has violated the HOEPA Law, request a loan audit.