NCUA issued a Regulatory Alert summarizing CFPB’s new
consumer protections for high-cost mortgages.
This is the HOEPA rule that many of you have been reviewing over the past
year preparing for the January 10, 2014 effective date. If any of the information in the Alert is new
to you – we recommend you read CUNA’s
CompNOTES on the new HOEPA rules to
ensure you understand the new compliance requirements.
5 things NCUA wants
you to know:
new rule expands the types of loans subject to HOEPA to include purchase-money
mortgage loans and HELOCs, in addition to refinancings and closed-end home equity
are three HOEPA coverage tests to determine whether a loan is a “high-cost
mortgage.” (a) APR test: if the
APR exceeds the average prime offer rate for a comparable transaction by more
than (i) 6.5% for a first lien; (ii) 8.5% for a first lien loan less than
$50,000 and secured by a dwelling that is personal property; or (iii) 8.5% for
subordinate liens. (b) Points &
Fees test: if the points and fees exceed (i) 5% of the total loan amount
for loans of $20,000 or more, or (ii) for loans less than $20,000, the lesser
of: 8% of the loan amount or $1,000. (c) Prepayment penalty test: if the
credit union can charge a prepayment penalty (i) more than 36 months after consummation
or account opening, or (ii) greater than 2% of the amount prepaid.
disclosure information: The written disclosure required at least three business
days before loan closing (or account opening) must: (a) inform the member that
the loan is not effective until the transaction is closed or account opened;
(b) explain the consequences of default; (c) disclose loan terms, such as APR,
amount borrowed, and monthly payments; (d) in the case of variable-rate loans,
explain the maximum monthly payment that might be required for a variable-rate
or prohibitions on certain loan features, such as balloon payments, prepayment
penalties, due-on-demand clauses, recommending default on existing loan,
modification fees, late fees, payoff statement fees, financing of points and
fees, and loan structuring.
to repay: The HOEPA rule requires you to determine a member’s ability to repay
a high-cost mortgage before closing a loan or opening an account. For
closed-end, you must comply with the ATR/QM rules. Since the ATR/QM rule does
not apply to HELOCs, the HOEPA rule requires you consider a member’s: (a)
current and reasonably expected income or assets; and (b) current obligations,
including any mortgage-related obligations such as property taxes, required
insurance premiums, community association fee, ground rent, and lease payments.
For more information see NCUA’s Regulatory
Alert No: 14-RA-02