July 31, 2012 – NAFCU released a Regulatory Alert Monday to seek members’ input on a proposed rule that would expand the types of mortgage loans that are subject to the Home Ownership and Equity Protection Act.
The proposed rule, which comes from the Consumer Financial Protection Bureau, would revise and expand the triggers for HOEPA coverage and would impose new restrictions, including a pre-loan counseling requirement.
NAFCU has long argued against unnecessarily increasing regulatory hurdles for all mortgage loans, including those that could come under HOEPA. NAFCU is also concerned that changes to the definition of “finance charge,” as included in the CFPB’s proposal combining the Truth in Lending Act and Real Estate Settlement Procedures Act would unwarrantedly bring more loans under HOEPA. A Regulatory Alert on that proposal was issued last week and can be found here, (along with the Regulatory Alert sent Monday).
Key aspects of the HOEPA-related mortgage loan proposal:
- the proposal will expand HOEPA coverage to most types of mortgages secured by a consumer’s principal dwelling, including purchase money mortgage loans (or seller financing), refinances, closed-end home equity loans and open-end credit plans. Reverse mortgages are not covered by the proposed rule.
- the HOEPA protections would be triggered where: (1) the annual percentage rate (APR) exceeds the prime rate by 6.5 percent for a first lien or 8.5 percent for a subordinate lien; (2) the points and fees exceed 5 percent of the total transaction amount; (3) the lender may charge a prepayment penalty more than 36 months after closing; or (4) the lender may charge penalties that exceed 2 percent of the prepaid amount.
- balloon payments would largely be banned.
- late fees would generally be restricted to four percent of the payment that is past due.
- fees for loan modifications or deferral would be banned.
- lenders originating open-end credit plans would be required to assess a consumer’s ability to repay.
- before making a high cost mortgage, lenders would be required to receive certification from a certified homeownership counselor that the consumer received counseling.
NAFCU needs to hear comments from members by Aug. 16. Comments are due to the CFPB by Sept. 7.