If you haven't run the numbers to see if selling credit protection insurance (credit life, A&H, disability or unemployment) on your home equity/home improvement/refi loans will pull you under HOEPA, better do so. Many lenders who aren't covered by HOEPA now are finding that they will be covered if the Fed proposal to change Reg Z/HOEPA coverage -- lowering the APR trigger and including optional credit insurance in the points/fees trigger -- goes through.

(When doing the calc to see if the 8% trigger is tripped, don't overlook that you must deduct the optional credit insurance from the Reg Z Amount Financed as well as add them to the list of fees.)

Comment deadline is March 9.

Pat is right on the money. An examiner with a curious mind tested some files using the current reg and the proposed test. This examiner discovered that banks that have no Section 32 loans under the current rule could have as many as 10% of their loans fall in under the proposed test. Get your comments in!

I think a comment I would like to make is that the 8% trigger is too low for loans that are secured by a secondary lien.

Risk based pricing demands that you increase the rate when the risk is higher. A secondary lien is not as secure a position as a first because of what must happen if you need to foreclose. A senior lienholder can wipe you out in foreclosure unless you want to pony up the money to pay the senior lien. Likewise if you need to foreclose, you are still on the hook for the amount of the senior lien.

To compensate for that risk, a higher interest rate is justified. I think the area that the should have the 8% trigger would be any FIRST LIEN REFINANCES!!!! After all, those can be the most predatory loans of all!!!

Good point, Bonnie.

Another problem with this proposal is its link with the HMDA/Reg C proposal, where the Fed wants reporting on whether a HMDA application is covered by HOEPA. Since so many activists equate HOEPA-loans to predatory loans, I think bank reputation risk is involved.

Also, while I'm not certain of this, I've seen other bankers assert that privacy issues are at stake with the HOEPA and HMDA proposals: That in rural areas or small towns, where there's not much lending activity, you'll be able to figure out, via matching HMDA LAR data with courthouse records, who the HOEPA loan went to and what the person's APR is.

Are the proposed revisions to Reg Z final? I read the Fed Reg from 4-9-02 But do not see where they are including the optional credit life and disability insurance under the finance charge. Am I blind or is the issue final? Our insurance vendor is warning us that we will not be able to sell insurance on 2nd mortgages without them becoming HOEPA covered loans. We ran the numbers on a $10,000, 7 year loan the CR and A/H will put it over the 8% trigger.

The rules are final. Compliance is mandatory October 1, voluntary until then.

Does BOL, or any our illustrious members, have an audit worksheet or matrix for performing tests on loans to determine if HOEPA is triggered?

Louvera posted one in the Tools section.

http://www.bankersonline.com/tools/tools_lender.html#2