HOEPA

HOEPA Test Functionality Is Now Included in WinLoan-32

As of October 1, 2002, Home Ownership Equity Protection Act (HOEPA) regulations determining which loans are "High Cost" have been expanded. A loan now falls into the "High Cost" category under HOEPA if either of the two following thresholds are exceeded:

1. The Points and Fees Test - If the loan points and fees (including Single Premium Credit Insurance) paid in conjunction with the loan exceed the greater of $480 or 8% of the total loan amount, the loan is "High Cost".
   


2. The APR Test - If the APR on a first-lien closed-end home equity loan exceeds the yield of a Treasury security with comparable maturity by more than 8 percentage points (10 percentage points on Subordinate-lien), the loan is "High Cost".

For the time being, the "Points and Fees" limits are fixed, so these amounts are entered in the WinLoan-32 only once at initial setup. Maintaining compliance for the "APR Test", however, requires that the Treasury security rates be updated in the WinLoan-32 Setup Files on a monthly basis. Click here for a Federal Reserve link with instructions on retrieving the current rates. At Step 4 of the instructions, click www.federalreserve.gov/releases/h15/update for a screen with Treasury security yields on various terms.

To enter these rates in the WinLoan-32 Setup Files, click on Setup Files at the top of your WinLoan-32 screen and then -> Loan Setup (enter password) and -> Mortgage Tab. Click on the "Allow HOEPA Prompts" checkbox and enter the Treasury Security Rates for all terms.

• If you'd like us to handle the updating of your treasury rates, please contact our Sales Department for information. For a small annual service charge, we will email a new rate file to you on a monthly basis. You can reach us at 800.776.6651, or via email at sales@shermanloan.com.
  


• If you wish to ignore the APR test, you will need to enter 99% in each field. If you leave the rates at 0%, and are using the HOEPA prompts, then you will not be able to properly quote any loans.

At the HOEPA Disclosure box, select one of three options handling loans when the HOEPA thresholds are exceeded.

1. Disallow - prevents the user from continuing with the loan and displays an error message detailing the tests/amounts that exceeded HOEPA thresholds. The user is then returned to the Loan Input Screen.

2. Show Message - offers the user a choice of continuing with the loan as it is or returning to the input screen to modify the loan entry prompts. Should the user decide to continue on with the loan disclosure, a new HOEPA section will be visible on the Full Disclosure. The HOEPA Disclosure section will detail the tests/amounts that caused the loan to be flagged.

3. Allow - completes the loan disclosure while displaying a message that either or both of the thresholds have been exceeded.

That completes the HOEPA setup entries. Click Save/Exit.