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Confusion Over The New TIL For High Cost Mortgages
Answer by: David Dickinson, BOL Guru

Question: There seems to be some confusion regarding the new TIL for High Cost Mtges that go in effect in Oct. Is this new ruling geared towards Primary residents only, or does include investment properties and if so, where can I find the verbage that states just that. I am in the state of Florida.

Answer: Here's a portion of the HOEPA section from our Advanced Lending compliance manual: -------------------------------------------- The Home Ownership Equity Protection Act applies to: [Section 226.32(a)(1)]

The requirements of this section apply to a consumer credit transaction that is secured by the consumer's principal dwelling, and in which either:
1. The annual percentage rate at consummation will exceed by more than 8 percentage points for first-lien loans, or by more than 10 percentage points for subordinate-lien loans, the yield on Treasury securities having comparable periods of maturity to the loan maturity as of the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or

2. The total points and fees payable by the consumer at or before loan closing will exceed the greater of;
a) 8 percent of the total loan amount (loans > $6,000); or
b) $480 (loans <$6,000); this figure shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index.

HOEPA does not apply to: [Section 226.32(a)(2)]
1. A residential mortgage transaction (construction loans, purchase loans, etc.)
2. A reverse mortgage transaction
3. An open-end credit plan (HELOCs)
Thus, if you have a consumer purpose refinance, home equity or home improvement loan, secured by the borrower’s principal dwelling and either 1 or 2 above are met, this loan is subject to the HOEPA requirements.
As you can see, Section 226.32(a)(1) tells us that this only applies to principal dwellings. You should check with your state laws as some states are imposing similar rules that may apply to more than just this coverage.

First published on 10/28/02

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