The CFPB issued a Dodd-Frank Act-mandated final rule that expands Home Ownership and Equity Protection Act (HOEPA) coverage for mortgages with high interest rates, fees or prepayment penalties.
The rule expands HOEPA to cover home-purchase loans and home equity lines of credit; revises the law’s rate and fee thresholds for coverage; and adds a new coverage test based on a transaction’s prepayment penalties.
Under the rule, a high-cost mortgage, among other things, is a loan with an annual percentage rate that is more than 6.5 percentage points higher than the average prime offer rate for first mortgages, and more than 8.5 percentage points higher than the average prime offer rate for second or junior mortgages.
For mortgages that qualify as high-cost, the rule generally bans balloon payments and prohibits prepayment penalties.
The rule also bans fees for modifying loans, caps late fees at 4%, prohibits closing costs from being rolled into the loan amount, and restricts fees lenders charge when consumers ask for a payoff statement.
Meanwhile, in a victory for ABA advocacy, the CFPB decided not to include in the final rule an “all-in APR” finance-charge option that would have dramatically altered APR calculations.
The final rule goes into effect on Jan. 10, 2014.
Read a consumer guide to the final rule.
Read the final rule.
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