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Excluded Loans Under HOEPA
Answer by: James W. Bruce, III, BOL Guru

Question: Is there a section in the regulation that clearly defines what loans are excluded under HOEPA (i.e., construction) Under state regulation it appears that construction loans are exempt however I am unable to locate anything in the reg.

Answer: HOEPA coverage and exclusions are found in Reg. Z section 226.32(a).

Section 32(a)(1) states that HOEPA requirements apply to consumer credit transactions that are secured by the consumer's principal dwelling. Other types of loans (e.g., business purpose loans) are, therefore, not covered.

Reg. Z section 226.32(a)(2) states the types of consumer credit transactions that are not covered by HOEPA: residential mortgage transactions, reverse mortgage transactions subject to section 226.33 and open-end credit plans. Reg Z section 226.2(24) defines residential mortgage transaction as "a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling."

First published on 12/16/2002

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