Topic: CFPB 2014 Mortgage Rules: HOEPA Changes
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An examiner told us we had violated the Home Ownership and Equity Protection Act (HOEPA) by treating certain mobile home loans as auto loans. When a loan secured by a mobile home that has not been permanently affixed to the ground but rather rests on a slab and can have its wheels reattached, we treat the loan as a vehicle loan. Are these types of loans subject to HOEPA?
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Yes, we believe that mortgages secured by mobile homes — whether or not they are permanently affixed to real property — are subject to HOEPA coverage if the mobile home is the consumers’ primary residence. Mortgage loans classified as “high cost” under the HOEPA regulations may include any consumer credit transaction secured by a consumer’s…
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We are looking for a chart that explains what charges should be included in the HOEPA (i.e. high-cost mortgage loan) points and fees calculation. Also, some of our closings are being held at a title company, and we would like to know if the title company fees are considered prepaid finance charges and if they should be included in the HOEPA points and fees calculation.
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We recommend referring to charts published by the National Credit Union Administration (NCUA) that outline the charges that should be included and excluded from the HOEPA points and fees calculation. Also, the CFPB has released a small entity compliance guide that walks through each category of charges included in the points and fees calculation. Both…
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We are updating the fields in our LaserPro system for end-of-year HOEPA triggers, and there are fields to enter the HOEPA triggers for first lien non-real estate loans less than $20,000 and greater than or equal to $20,000. Where can I find these thresholds?
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The HOEPA (i.e., high-cost mortgage loan) points and fees trigger is based on whether the loan amount is less than an inflation-adjusted threshold of $20,000, or greater than or equal to the inflation-adjusted threshold of $20,000. For 2019, that threshold was $21,549. For 2020, that threshold is $21,980. Additionally, for transactions that are less than…
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We are updating the fields in our Laser Pro system for end-of-year HOEPA triggers. Where can I find the state of Illinois high-cost mortgage interest rate triggers for first and second liens?
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Illinois’ equivalent of the federal HOEPA regulations for “high-cost” mortgage loans is the Illinois High Risk Home Loan Act (Act). Under the Act, the interest rate trigger for a “high risk home loan” is an annual percentage rate that exceeds the average prime offer rate (APOR) by more than six percentage points for first lien…
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Can we add a provision to our consumer residential loan agreements imposing a default interest rate? Currently, only our HELOC loan agreements provide for default interest rates, which are triggered when the loan is being terminated or accelerated. If a HELOC borrower becomes delinquent or pays late, can we impose the default interest rate, even if the loan is not being terminated or accelerated?
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Yes, we believe you may add a default interest rate provision to your consumer residential loan agreements, but they may be subject to court scrutiny if they are not considered “reasonable.” Illinois courts have examined loan agreements with default interest rates and generally have found that “reasonable” rate increases after default are permissible. For example,…
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We are changing how we charge cancellation fees on our HELOCs to avoid violating HOEPA. Is there anything in the rules that prohibits tiered prepayment penalties for HELOCs based on the line amount?
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We are not aware of any prohibitions of using a tiered prepayment penalty system based on the amount of the line of credit for a home equity line of credit (HELOC). As you noted, the CFPB’s new HOEPA rules qualify a loan as a “high-cost mortgage” if a prepayment penalty can be charged more than…
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Under the HOEPA points and fees test, do we need to include title company fees if we have a title company affiliate, even if we use that company only for our commercial closings?
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No. We believe you would have to include affiliate title company charges in the points and fees calculation only if you used your affiliate for that particular loan. The HOEPA regulations permit you to exclude any “bona fide third-party charge not retained by the creditor, loan originator, or an affiliate of either.” 12 CFR 1026.32(b)(1)(i)(D).…
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Are lender paid closing costs excluded from the IHRHLA points and fees test?
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Provided that you are not retaining any portion of the closing costs, we believe that lender paid closings costs would be excluded from the “points and fees” calculation. The Illinois High Risk Home Loan Act (IHRHLA) exempts “bona fide third-party charges not retained by the mortgage originator, creditor, or an affiliate of the mortgage originator…
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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.
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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…
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Can we add a provision to our junior lien mortgage agreements that would allow us to recoup any third party fees that we paid at closing, in the event that the customer pays off the loan shortly after closing (i.e., within two or three years)?
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[Please note that this question was revised on August 5, 2015, to reflect a change made to Illinois law by Public Act 99-288.] Yes, you may recoup third party fees from customers who prepay loans, provided that recoupment is possible only within the first three years after the loan closing. Both federal and Illinois law…