Insurance & Redlining Laws
HOEPA
What is HOEPA?
HOEPA (Home Ownership and Equity Protection Act) is a law that regulates high cost loans.
What loans does it cover?
HOEPA applies to most home equity and refinance loans secured by the borrower's home. There are 2 main parts to HOEPA: 1) the Annual Percentage Rate (APR) and points and fees threshold that show when a specific high cost loan is subject to the law, and 2) certain prohibitions and restrictions that are placed on high cost loans covered by the law.
What constitutes a high cost loan that becomes subject to HOEPA restrictions?
Loans with an APR of 10% above the Treasury rate, or loans with points and fees that total more than 8% of the loan amount are subject to HOEPA. The law has very specific definitions of points and fees, so that not all points and fees are included in the 8% trigger. There are two significant changes in the current FRB proposal. One is the lowering of the APR threshold to 8% above the Treasury rate, or about 14% at today's rate, which will capture more high cost loans under HOEPA's protections. Two, the proposal seeks to include the costs of optional credit insurance products in the points and fees test, which will lead to more loans being covered by HOEPA, and possibly even to lenders halting sales of this expensive and abusive product which has come to symbolize predatory lending. Yet the FRB has the authority to outlaw practices that are particularly abusive and deceptive. The FRB should go further than it proposes, and outlaw outright the sale of credit life insurance and other similar credit prod as mandatory arbitration provisions which deny equal access to justice to low income and minority borrowers.
Predatory Lending Brochures:
- Putting Your Home on the Loan Line is Risky Business
- Utilizar su Hogar Como Garantía Para un Préstamo es Arriesgado - en Español
- Don't Fall Prey to Predatory Lending (PDF file)
- No Sea Victima de Presmistas Depredadores - en Español (PDF)
- Predatory Lending Fact Sheet - prepared by Illinois Attorney General, Lisa Madigan
HUD: Predatory Lending
copyright © 2012
Illinois Association of REALTORS®
