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HOEPA - Home Ownership Equity Protection Act

As of January 10, 2014, Home Ownership Equity Protection Act (HOEPA) regulations (§ 1026.32 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 transaction’s total points and fees paid in conjunction with the loan exceed a certain amount, the loan is considered “High Cost”.

    • If the loan amount is >= $20,000, then the maximum points and fees allowed is equal to 5% of the total loan amount.
    • If the loan amount is < $20,000, then the maximum points and fees allowed is equal to the smaller of {8% of the total loan amount, $1,000}

    Note that the $20,000 and $1,000 fixed dollar amounts mentioned above are altered on the 1st of January each year. Consult the official interpretation of paragraph 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 6.5 or 8.5 percentage points (depending upon the lien type and loan amount), the loan is “High Cost”.

    Maintaining compliance for the “APR Test” requires that tables containing the Average Prime Offer Rates (APOR) for fixed and adjustable rate mortgages be updated on a weekly basis. The most recent APOR tables may be found here.

The SCEX family of products features loan calculation and compliance software
for the end user, as well embedded solutions for partners to use in their own
end user applications. 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.