HMDA high-cost triggers

Question: We are hearing confusing things about high cost mortgages and changes to the triggers. At a recent seminar, a speaker described the high-cost triggers as 3% and 5% for first and subordinate liens. I thought the figures were 8% and 10%. Has HOEPA been changed?

Answer: HOEPA rules have been changed, but not to that extent! I'm afraid that your speaker was mixing up the reporting triggers for the 2004 HMDA reports and the actual high-cost triggers in ?226.32. Essentially, HMDA requires reporting of loans before they actually become high-cost loans for purposes of HOEPA and Regulation Z. You might think of these as "mid-way" loans. Reporting is triggered by the 3% and 5% spreads for first and subordinate liens. But the fact that these are reported does not make them high-cost loans for purposes of Truth in Lending's special disclosures. HMDA also requires you to report whether the loan is or is not a high cost loan. This is a different information item from the spread you will be reporting.

Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 11, 11/03