HMDA – HOEPA STATUS

Section 1003.4(a)(13) of Regulation C requires that the Loan Application Register indicate, among other items, whether the loan is subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA), as implemented in Regulation Z (12 CFR 1026.32). Under current rules a loan secured by a consumer’s principal dwelling is subject to HOEPA if the loan has a high rate or high fees.

Currently a loan has high fees if the total points and fees payable by the consumer at consummation exceed the greater of $400 or 8 percent of the total loan amount. Regulation Z provides that the $400 figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index (CPI) that was reported on the preceding June 1. Effective January 1, 2014, a loan is covered if the points and fees exceed $632 or 8 percent of the total loan amount, whichever is greater.

Last January, the Consumer Financial Protection Bureau issued a final rule which revised the HOEPA coverage rules. Under the revised rules, a loan secured by a consumer’s principal dwelling is subject to HOEPA if the loan has a high rate (determined with a revised test), high fees (determined with a revised test), or a significant prepayment penalty.

Under the new rules HOEPA applies if the transaction’s total points and fees exceeds:

(A) 5 percent of the total loan amount for a transaction with a loan amount of $20,000 or more; or

(B) The lesser of 8 percent of the total loan amount or $1,000 for a transaction with a loan amount of less than $20,000. This new $1,000 threshold will be adjusted annually.

The amendments apply to loans for which the creditor receives an application on or after January 10, 2014. Accordingly, HMDA reporters should continue to use the current HOEPA triggers, including the new $632 fee trigger, for loans consummated on or after January 1, 2014 until the revised HOEPA triggers take effect on January 10, 2014. For loans for which the creditor receives an application on or after January 10, 2014 the new triggers are used to determine HOEPA status.

Assume a $19,000 loan secured by the borrower’s principal dwelling has a total of points and fees of $1,100. Assume also that the APR does not trigger HOEPA status and that the transaction does not include a prepayment penalty. If the application is received:

  • On or after January 1, 2014, but before January 10, 2014, the transaction is not subject to HOEPA based on the total of points and fees. The applicable point and fees threshold would be $1, 520 based on the greater of 8% of the total loan amount ($1,520) or $632.
  • On or after January 10, 2014 the transaction is subject to HOEPA based on the total of points and fees. The applicable points and fees threshold would be $1,000 based on the lesser of 8% of the total loan amount ($1,520) or $1,000.

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