Notice: Function _load_textdomain_just_in_time was called incorrectly. Translation loading for the wp-migrate-db domain was triggered too early. This is usually an indicator for some code in the plugin or theme running too early. Translations should be loaded at the init action or later. Please see Debugging in WordPress for more information. (This message was added in version 6.7.0.) in /srv/app/gotoiba-dev/htdocs/web/wp-includes/functions.php on line 6121
Do we have to consider the rate ceiling for our HELOCs to determine whether they are considered “high-cost” mortgage loans under the new CFPB HOEPA rules? Our HELOCs have rates that vary according to an index, but the maximum interest rate on the loans is very high. – IBA Compliance Connection

Do we have to consider the rate ceiling for our HELOCs to determine whether they are considered “high-cost” mortgage loans under the new CFPB HOEPA rules? Our HELOCs have rates that vary according to an index, but the maximum interest rate on the loans is very high.

by

For purposes of determining whether a loan sets off the interest rate trigger under the CFPB’s new HOEPA rules, we do not believe that you would have to consider a HELOC’s rate ceiling, provided that the HELOC’s interest rate “varies solely in accordance with an index.” To determine whether such a HELOC sets off the interest rate trigger, you must consider “the interest rate that results from adding the maximum margin permitted . . . to the value of the index rate in effect as of the date the interest rate for the transaction is set.” 12 CFR 1026.32(a)(3)(ii)also see Official Interpretations, 12 CFR 1026.32, Paragraph 32(a)(3); Comment 3. (This assumes that your HELOCs do not use introductory interest rates, as you have indicated.)

For your institution’s HELOCs, you would apply the margin for each HELOC to the index rate on the date on which the loan’s interest rate is set. As you have indicated, your institution’s HELOCs do not have margins that can vary throughout the life of a loan, so you would simply apply the HELOC’s margin to the current index rate. If that number does not exceed the HOEPA interest rate trigger (6.5% for first lien loans, 8.5% for second lien loans), then the HELOC would not be considered a high-cost loan (assuming that the points and fees and prepayment penalty triggers do not apply).