Subtitle C: High-cost Mortgages
HOEPA High-Cost Mortgages
Amends HOEPA and expands its coverage to home purchase loans. Revises APR triggers for HOEPA loans to greater than 6.5 percent above APOR for comparable transactions for first lien loans (8.5 percent if dwelling is personal property and transaction is less than $50,000) and greater than 8.5 percent above for subordinate lien loans. Also, lowers point and fees trigger from 8 percent of total loan amount to 5 percent (lesser of 8 percent or $1000 for loans under $20,000). Also, creates new HOEPA trigger for loans with prepayment penalties beyond 36 months and exceeding two percent. Allows FRB to increase or decrease APR triggers within limits. Calculates APR for loans where rate varies with index using current index and maximum contractual margin.
Expands definition of points and fees to include all compensation paid by consumer or creditor directly or indirectly to mortgage originator, premiums for credit life, disability, unemployment and property insurance not paid on monthly basis, maximum prepayment penalty that can be collected under new loan and prepayment penalties incurred by consumer if loan refinances previous loan made by or held by same creditor or affiliate of creditor. Excludes from point and fees trigger up to two bona fide discount points under specific conditions. Also, excludes any government insurance premium and any private insurance premium up to amount of FHA insurance premium, provided PMI premium is refundable on pro rata basis, and any premium paid by consumer after closing.
Amendments to Existing Requirements for Certain Mortgages Prohibits balloon payments and prepayment penalties for high-cost mortgage loans.
Additional Requirements for Certain Mortgages
TILA §129 is amended as follows regarding high-cost loans:
- Recommend Default – Prohibits creditor from recommending or encouraging default on existing loan in connection with closing of high-cost refinance loan.
- Late Fees – Limits late fees to four percent of payment due on high-cost loans.
- Pyramiding of Late Fees – Prohibits pyramiding of late fees (grants states right to enforce existing law). When mortgage agreement applies payments to principal first, creditors may impose separate late fees for any principal due until default is cured.
- Unilateral Acceleration – Prohibits unilateral acceleration of mortgage except in case of monetary default, due-on-sale, and “material violations” of provision in documents.
- Financing Prepayment Penalty – Prohibits creditor from financing:
- prepayment fee if it is current note holder or its subsidiary
- points and fees are on high-cost loan.
- No Modification or Deferral Fee – Prohibits creditor or third-party from charging fee to modify, renew, extend or amend high-cost mortgage or to defer payment.
- Pay-off Statements – Before charging fee, requires servicer to notify borrower that pay-off statements can be free; requires four free pay-off statements per year. Requires pay-off statements to be provided within 5 business days of request. Allows a processing fee to cover cost of faxing or using courier service to transmit information but must be comparable to fees on non-high-cost mortgages.
- Pre-loan Counseling – Requires certification from HUD approved counselor before creditor can extend high-cost loan to consumer.
- Corrections and Unintentional Violations – Allows creditors and assignees 60 days in which to cure good faith violation of section. Borrower may select remedy of correcting violation or changing terms so loan is no longer a high-cost loan.