The fee threshold for loans subject to Home Equity Protection Act requirements is being increased in two stages next month.
Amendments in 1994 to the Truth in Lending Act’s Regulation Z implemented the HOEPA, which imposed substantive limitations and additional disclosure requirements
HOEPA applies to closed-end home loans that have annual percentage rates or points and fees above a certain threshold.
The Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 expanded HOEPA protections to purchase financing and home-equity lines of credit.
Initially, the threshold was the greater of $400 or 8 percent of the loan amount.
But the dollar limit has been adjusted annually based on the Consumer Price Index.
On Monday, the Consumer Financial Protection Bureau will publish a notice that will raise the fee trigger to $632 from $625 for 2013. The increase is based on a 1.1 percent change in the CPI from April 2012 to April 2013.
The updated threshold impacts loans closed on or after Jan. 1, 2014.
However, a final rule issued by the CFPB in January 2013 pursuant to Dodd-Frank revised the statutory fee trigger for HOEPA loans in addition to prohibiting high-cost mortgages from having prepayment penalties or balloon payments.
Based on the final rule, the new trigger will be increased to $1,000 for all loans with applications received on or after Jan. 10, 2014.
So the $632 fee trigger that takes effect on Jan. 1 will apply only until the revised HOEPA fee trigger takes effect.
