HOEPA

As of October 1, 2002, Home Ownership Equity Protection Act (HOEPA) regulations (§ 226.32 of Regulation Z) 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 $579 (as of Jan. 1, 2010) or 8% of the total loan amount, the loan is "High Cost".

   Note that the fixed dollar amount changes on the 1st of January each year. Consult Supplement I - Official Staff Interpretations, Comment on § 226.32(a)(1)(ii) for the most current year's adjusted figure.

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".

   Maintaining compliance for the "APR Test" requires that the Treasury security rates be updated in the WinLoan-32 oe eWinLoan setup files on a monthly basis. Current Treasury rates for various terms rates may be found here.

These two HOEPA tests are implemented and available in all three of our products: WinLoan-32, eWinLoan, and the SCEX. If your product does not currently implement the HOEPA tests and your organization wishes to, please contact our technical support team for further information.

If you have the WinLoan-32 and would like to configure the HOEPA tests yourself, then follow these steps:

1. On the WinLoan-32 menu bar, click on Setup Files -> Loan Setup.
2. Enter the password required to access the setup files.
3. Once the Loan Setup screen is displayed, click on the Mortgage tab.
4. Check the "Allow HOEPA Prompts" checkbox to enable all of the relevant HOEPA settings.
5. Make sure that the value in the "Points and Fees Trigger" prompt is correct.
6. Enter the Treasury rates for all terms.
7. The "HOEPA Disclosure" setting dictates what the WinLoan-32 will do if a loan falls under the HOEPA regulation:
   • 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.
   • 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.
   • Allow - completes the loan disclosure while displaying a message that either or both of the thresholds have been exceeded.
8. Click on the "Save / Exit" button to commit your changes.