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HOEPA, also known as the Home Ownership and Equity Protection Act was enacted way back in 1994 in order to combat abusive lending practices in mortgage dealings across USA. HOEPA provides borrowers added protection for mortgages with high annual percentage rates (APRs) or high points and fees (high-cost mortgages).
The Dodd-Frank Act amended HOEPA to enhance its protection and provide home owners with better security. Some of the amendments which make HOEPA relevant in the mortgage lending scene include -
Some of the loans covered under HOEPA compliance requirements include -
At the same time, there are quite a few loans which are exempt from proper HOEPA coverage, including -
As we have seen previously, only high-cost mortgages belong to HOEPA. At the same time, there is often confusion about which loans are considered high-cost mortgages. In simple terms, a loan is considered high-cost if the transaction's APR (Annual Percentage Rate) exceeds the APOR (Average Prime Offer Rate) on a particular date for comparable transactions which is more than -
In certain cases, a loan can also be considered to be high-cost by calculating the total amount of points and fees paid during the transaction tenure, or also with the help of prepayment penalties.
According to the HOEPA act, if a loan meets all the above-mentioned criteria, the lender has to provide several disclosures to the borrowers at least 3 days before the loan is closed. The disclosures required for HOEPA include -
Some of the practices which are prohibited under HOEPA include -
If a lender does not follow HOEPA regulations, or tries to bypass the rules and regulations by any untoward means, then -
At FWS, we have more than 11 years of experience in helping lenders optimize their systems, procedures, policies, controls, and training in compliance to HOEPA rules and regulations. We have offered our mortgage services, including mortgage underwriting, loan processing, etc. to global clients at cost-effective rates.
Contact us right away and learn how our HOEPA-compliant processes can help you ease your high-mortgage service delivery.
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