Contact: Edmund D. Harllee; Williams Mullen (North Carolina & Virginia, USA)
On August 15, 2012, the Bureau of Consumer Financial Protection (the “Bureau”) issued a proposed rule and request for public comment on changes to its Regulation Z (Truth in Lending) and Regulation X (Real Estate Settlement Procedures Act) to implement the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(the “Act”) with respect to mortgage loans subject to the Home Ownership and Equity Protection Act of 1994 (“HOEPA”). The final rule would modify the above regulations in two ways:
1. Expansion of Coverage under HOEPA. Loans covered by HOEPA are subject to special disclosure requirements and substantive restrictions on loan terms. Borrowers under these loans are also given enhanced remedies for violations of the statute. Prior to the effective date of these provisions of the Act, HOEPA applied generally to closed-end consumer mortgages, excluding purchase money mortgages and reverse mortgages. Coverage was triggered where the loan’s APR exceeded a certain threshold, or where points and fees on the loan exceeded 8% of the total loan amount or a dollar threshold.
Under the Act, HOEPA protections would apply to more types of loans, including purchase money mortgages and home-equity lines of credit. In addition, the high-cost triggers have been enhanced. HOEPA protections would be triggered where (i) the loan’s APR exceeds the average prime offer rate by 6.5% for most first-lien loans and 8.5% for subordinate lien loans, (ii) the loan’s points and fees exceed 5% of the total transaction amount (or a greater threshold for loans of under $20,000), or (iii) the lender may charge a prepayment penalty of more than 2% of the amount prepaid, or a prepayment penalty may be imposed more than 36 months after closing.
To learn more about the proposed rule, please click here to continue reading.
