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HOEPA Help Requested
Answer by David Dickinson, BOL Guru
BIO AND CONTACT INFO

Question: I am having a horrible time trying to get the concept of figuring the fee's on a loan, to verify that it's not, or is, a HOEPA loan. Is there a calculator that can do this for us? (other then the worksheet!) I have a very difficult time, trying to figure out which fees need to be where.....thank you for taking the time to read this!! And thank you in advance for the help!

Answer: Refer to §226.32(b)(1) for help on the Points and Fees test. HOEPA has expanded the definition of points and fees beyond that of typical finance charges. HOEPA "points and fees" include:

  1. 1. All items required to be disclosed under §226.4(a) and 226.4(b) (finance charges), except interest or the time-price differential;
  2. All compensation paid to mortgage brokers;
  3. All items listed in §226.4(c)(7) [real estate underwriting fees like title insurance, appraisals, credit reports, etc.] (other than amounts held for future payment of taxes) unless
    a. the charge is reasonable,
    b. the creditor receives no direct or indirect compensation in connection with the charge, and
    c. the charge is not paid to an affiliate of the creditor; and
  4. Premiums or other charges for credit life, accident, health or loss-of-income insurance or debt-cancellation coverage (whether or not the debt-cancellation coverage is insurance under applicable law) that provides for cancellation of all or part of the consumer's liability in the event of the loss of life, health or income or in the case of accident, written in connection with the credit transaction.
In short, if the bank or an affiliate of the bank (control or ownership of 25% or more) retains all or a portion of a fee charged on an applicable loan, the fee would need to be included as a "point or fee payable" to determine if HOEPA applies.

The following are some examples of charges that would be included in determining "points and fees payable" for HOEPA purposes:
  • Points, Loan fees, Origination fees, etc.;
  • Appraisal fee (if completed internally or by an affiliate);
  • Credit life/disability insurance premiums;
  • Yield spread premiums, service release premiums;
  • Title insurance (if completed by an affiliate);
  • Document preparation fees;
  • All mortgage broker compensation paid by the consumer.
 You can download a HOEPA calculator (in Excel) at the Banker's Compliance Consulting web site. This worksheet was developed by Louvera Walden, amended by myself and "tweaked" by Andy Zavoina.

First published on BankersOnline.com 9/2/03
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