For clarity, are second homes permitted to be HPMLs? (Meaning, it is allowed for the APR on a second home to be higher than APOR + 1.5?) Both Sections seem to only reference dwellings, which don't appear to specifically rule out second homes. Interpreting this as the APR on second homes cannot exceed the limit.

This is a snippet of the regulation. You can see it states 'principal' dwelling.

a) Definitions. For purposes of this section:

(1) "Higher-priced mortgage loan" means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:

So it is correct to assume that second homes cannot exceed the limit?

My opinion is that there is no limit since this portion of the regulation doesn't apply to second homes.

From 1026.35:

(a) Definitions. For purposes of this section:

(1) "Higher-priced mortgage loan" means a closed-end consumer credit transaction secured by the consumer's principal dwelling

Second or vacation homes would not be subject to 1026.35.

From 1026.43

(a) Scope. This section applies to any consumer credit transaction that is secured by a dwelling, as defined in § 1026.2(a)(19), including any real property attached to a dwelling, other than:

(1) A home equity line of credit subject to § 1026.40;

(2) A mortgage transaction secured by a consumer's interest in a timeshare plan, as defined in 11 U.S.C. 101(53(D)); or

b) Definitions. For purposes of this section:

(1) Covered transaction means a consumer credit transaction that is secured by a dwelling, as defined in § 1026.2(a)(19), including any real property attached to a dwelling, other than a transaction exempt from coverage under paragraph (a) of this section.

Any consumer purpose loan secured by a dwelling is subject to 1026.43 unless it meets one of the specified exemptions.

Cannot exceed the limit is not the best way to look at it. If the limit is exceeded and a loan is an HPML as a result, then you just have to deal with the fact that it has an HPML status. But, to further bolster what Skittles is getting at, check out Section 2.3 of the following: https://files.consumerfinance.gov/f/201603_cfpb_tila-hpml-escrow_compliance-guide.pdf. As noted in the definition to be an HPML it has to relate to the principal dwelling of the consumer, so second homes would not be subject to the HPML requirements in Reg. Z.

(1) “Higher-priced mortgage loan” means a closed-end consumer credit transaction secured by the consumer's *principal dwelling* . . .