HOEPA & High Rate Mortgage Loans

If you wish to buy a home then you might require a loan for it. This loan would vary in term of interest rate as some lenders might offer you a high rate where as some might offer you a lower rate. However, if you getting a loan which is on high rate then you need to know what HEOPA is. It is the Home Ownership and Equity Protection Act of 1994 which protects the consumers when they take high rate loans. Loans are categorized between two types, first lien and second lien loans. First lien loan is one whose rate exceeds 8% and second lien loans are one whose rate is above 10% and these will be regulated by HOEPA as they are considered high rate loans.

If you wish HOEPA to benefit you then it would require your lender to provide additional mortgage loan disclosures when it is a high rate loan.

There are some features which HOEPA prohibits from expensive loans, interest rate increase, negative amortization, unfavorable interest calculation when a borrower defaults, balloon payments for loans with 5-year terms, or shorter, prepayment penalties and due-on-demand clauses except when the consumer gets involved in a fraud, or the consumer defaults with the loan repayment, or consumer acts affect negatively the home, used as security for the loan.

If you extend HOEPA loan then you are disallowed to firstly, refinance your HOEPA loan into a new HOEPA loan within 12 months from the transaction, unless it’s in the borrower’s best interest. Secondly, structure HOEPA loans as HELOCs unless there is an obvious need for repetitive disbursements of funds. Finally, Make HOEPA loans disregarding the borrower’s ability to repay the loan.

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