Alert July 10, 2012

CFPB Issues Proposed Rule on HOEPA

The CFPB also issued a proposed rule that would amend Regulation Z to implement changes to the Homeowner and Equity Protection Act made by the Dodd-Frank Act.  Loans subject to HOEPA have heightened disclosure requirements and restrictions on loan terms.  The Dodd-Frank Act expanded HOEPA to apply to additional types of mortgage transactions (e.g., purchase money mortgage loans and HELOCs).  The Dodd-Frank Act also added a prepayment penalty trigger and expanded other borrower protections on HOEPA loans.  Generally, the proposal is in line with the Dodd-Frank expansion of the types of loans covered by HOEPA, but excludes reverse mortgages. 

In addition, the proposal would require lenders to distribute a list of homeownership counselors or organizations to consumers within 3 business days after applying for a HEOPA loan and, for first-time borrowers, impose a homeownership counseling requirement prior to obtaining a negative amortization loan.  The proposal would also change the points and fees ceiling for coverage.  Comments must be received by September 7, 2012.  More information about the CFPB’s mortgage rules can be found on the mortgage rule fact sheet.