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The Illinois High Risk Home Loan Act requires us to compare a loan’s interest rate to the yield on U.S. Treasury securities, but Regulation Z requires us to use the average prime offer rate. Should we be running two tests for HOEPA? – IBA Compliance Connection

IBA Compliance Connection

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The Illinois High Risk Home Loan Act requires us to compare a loan’s interest rate to the yield on U.S. Treasury securities, but Regulation Z requires us to use the average prime offer rate. Should we be running two tests for HOEPA?

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The Illinois High Risk Home Loan Act has been amended to adopt the federal standard of the average prime offer rate (APOR). 815 ILCS 137/10 (scroll down to view the section “after P.A. 97-849 takes effect,” since that law took effect on January 10, 2014). However, we do recommend running separate interest rate tests under the Illinois law and federal law — the Illinois interest rate triggers are at 6% and 8%, versus 6.5% and 8.5% under Regulation Z, among other differences. See 815 ILCS 137/1012 CFR 1026.32(a)(1).