☑️ Chapter 9: Federal Probibition of Predatory Lending Flashcards
Home Ownership and Equity
Protection Act (HOEPA):
The Home Ownership and Equity Protection Act (HOEPA), a 1994 amendment to the Truth in Lending Act, establishes DISCLOSURE requirements and PROHIBITS _____ and unfair practices in lending. HOEPA also establishes requirements for loans with high interest rates and/or fees termed _____ Loans. The rules for these loans are contained in Regulation Z, which implements the Truth in Lending Act. [Requirements for certain closed-end home mortgages]
A. Deceptive
B. High-Cost
Home Ownership and Equity
Protection Act (HOEPA):
This Act is enforced by the ______ for non-depository lenders and by each state’s attorney general. The CFPB enforces the Act for federally-regulated depository institutions. The rule making and enforcement authority for TILA and HOEPA were transferred to the ______ in July 2011. HOEPA also gives the ______ broad regulatory authority to prohibit additional practices it finds to be unfair or deceptive, NOT JUST for high-cost loans, but all consumer mortgage loans.
A. Federal Trade Commission (FTC)
B. CFPB
C. Federal Reserve Board
Home Ownership and Equity
Protection Act (HOEPA):
A lender who violates HOEPA may be SUED by the consumer, who may be able to recover statutory and actual damages, court costs, and attorney’s fees. In addition, a violation of HOEPA may enable a consumer to rescind the loan for up to _____ years following loan consummation.
A. Three
Home Ownership and Equity
Protection Act (HOEPA):
High-Cost Loans:
_____ Mortgage and Homeownership Counseling
Amendments to the Truth in Lending Act (TILA) [Regulation
Z] and Homeownership Counseling Amendments to the Real Estate Settlement Procedures Act (RESPA) [Regulation X] Summary.
A. High-Cost
Home Ownership and Equity
Protection Act (HOEPA):
High-Cost Loans:
HOEPA provisions must be complied with after the triggers for a “high-cost loan” have been met. A _____ loan, (also known as a Section ____loan), according to HOEPA, is a closed-end loan or open-end credit plan secured by a borrower’s principal residence.
This includes purchase-money mortgages, refinances, closed-end home equity loans and open-end home equity lines of credit (HELOC). With some exceptions, _____, ______, _____, and ____ loans are EXEMPT from HOEPA coverage, as are loans made on ______ homes and vacation homes.
A. High-Cost Loan
B. Section 32
C.
a. Reverse Mortgages b. construction loans
c. HFA
d. USDA
e. Second
Home Ownership and Equity
Protection Act (HOEPA):
High-Cost Loans:
A loan is considered a High-Cost Loan if any of these thresholds are met:
• The first lien on the property has an APR that exceeds the value of the APOR Index (as of the loan lock-in date) by more than _____ percentage points.
• A second mortgage has an APR that exceeds the value of the APOR Index as of the loan lock-in date) by more than _____ percentage points.
• When the total loan amount for a transaction is $22,969 or more and the points and fees amount exceeds 5% of the total loan amount. Note: The loan amount border changes each year. $22,969 is the border for 2022.
• When the total loan amount for a transaction is less than $_____ and the points and fees amount exceeds the lesser of the adjusted points and fees dollar trigger of $_____ or ____% of the total loan amount, the transaction is a high-cost loan. NOTE: The loan amount border changes each year. $_____
is the border for 2022.
A. 6.5 percentage points
B. 8.5 percentage points
C. $22,969
D. $1,148
E. 8%
F. $22,969
Home Ownership and Equity
Protection Act (HOEPA):
High-Cost Loans:
HOEPA does NOT regulate _____ loans or _____ mortgages.
NOTE: The ______ is defined as the annual percentage rate derived from average annual percentage rates currently offered to consumers by a representative sample of lenders for prime mortgage transactions. A representative example of the prime offer rate tables follow.
A. average prime offer rate (APOR)
B. Construction
C. Reverse
Home Ownership and Equity
Protection Act (HOEPA): Required Disclosures:
Creditors granting loans hitting HOEPA thresholds must disclose certain facts about the loan as part of the loan package at least ______ business days prior to _____ of a mortgage transaction. The disclosure notice generally follows a certain format.
A. three
B. consummation
Home Ownership and Equity
Protection Act (HOEPA): Required Disclosures:
This notice is intended to protect consumers from pressure tactics that imply the consumer is already locked into the agreement, or that canceling will be prohibitively complex or expensive.
In addition, the creditor must disclose:
• The ____.
• The regular _____ amount (including any BALLOON payment where the law permits BALLOON payments).
• The loan ______ (when the amount borrowed includes credit insurance premiums).
• For variable rate loans, the amount of the ____ monthly payment and the fact that the rate and monthly payment may increase.
• For a mortgage ______, the total amount borrowed as reflected by the face amount of the note.
When the amount borrowed includes premiums or other charges for optional credit insurance or debt-cancellation coverage, that fact must also be stated.
To be considered accurate, the amount disclosed cannot vary by more than $_____ above or below the amount required to be disclosed.
These disclosures are in addition to the other required
Truth in Lending disclosures.
A. APR
B. payment
C. amount
D. maximum
E. refinancing
F. $100
Home Ownership and Equity
Protection Act (HOEPA):
Higher-Priced Mortgage Loans:
TILA Regulation Z has been amended with rules that affect ________ mortgage loans, which were part of the Housing and Economic Recovery Act of 2008, which amended Regulation Z and the Truth In Lending Act. Regulation Z sets forth the specific requirements for higher-priced mortgage loans.
A. Higher-Priced
Home Ownership and Equity
Protection Act (HOEPA):
Higher-Priced Mortgage Loans:
Higher-priced mortgage loans (HPML) are closed-end mortgage loans that are secured by the borrower’s principal dwelling. A _____ mortgage loan is defined as a loan where the APR of a mortgage loan exceeds the average prime offer rate by:
1. 1.5% for a ____ mortgage lien
2. 2.5% for a first lien ____ loan (loan amount over $_______)
3. 3.5% for any ______ mortgage lien
A. Higher-Priced
B. First
C. Jumbo
D. $647,200
E. Subordinate
F. Additional
Home Ownership and Equity
Protection Act (HOEPA):
Higher-Priced Mortgage Loans:
A loan originator may verify if a prospective loan is a high-cost or higher-priced mortgage loan by determining the loan APR and entering the data at the ______ Calculator website. The APR calculation is based on the locked interest rate of the prospective loan. This site will calculate the rate spread between the _____ and the _____ in effect.
A. FFIEC Rate Spread
B. APR
C. APOR
Home Ownership and Equity
Protection Act (HOEPA):
Higher-Priced Mortgage Loans:
If the loan being made is a _____ mortgage loan, the originator must establish:
a. The borrower’s ability to _____ the mortgage loan,
b. An escrow account for property taxes, homeowner’s insurance, private mortgage insurance, etc. for a _____-year term. COOPERATIVES, CONSTRUCTION loans, BRIDGE loans and REVERSE mortgages are EXEMPT from the ESCROW requirement and other exceptions do exists, and
c. A full ____ with a physical visit of the interior of the property has been performed by a certified or licensed appraiser. An additional appraisal may be required if the property was acquired less than ____ days prior to the sales contract.
A. Higher-Priced
B. Repay
C. 5
D. Appraisal
E. 180 Days
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
A loan that is subject to HOEPA may NOT include:
• A payment schedule that provides for regular periodic payments that do NOT fully amortize and RESULT in a _____ payment on high-cost loans having terms of less than _____ years, unless it is a bridge loan of less than _____ year used by consumers to buy or build a home.
A. Balloon
B. 5 Years
C. 1 Year
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
_______, which involves monthly pavments that do not fully pav the interest due on the loan and that cause an increase in the borrower’s total principal debt. Any interest rate changes and payment schedule caps must be coordinated to avoid this situation.
A. Negative Amortization
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
A ________ that consolidates more than two periodic payments that are to be paid in advance from the proceeds of the loan. The borrower should get the maximum use of the funds and have a legitimate opportunity to use the loan proceeds.
A. Repayment Schedule
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
________ that are higher than pre-default note rates and increase due to a default of the borrower.
A. Default Interest Rates
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
A loan that is subject to HOEPA may NOT include:
______, is a refund calculated by a method less favorable than the actuarial method for rebates of interest arising from a loan acceleration due to default.
A. Rebating
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
Prepayment penalties, although there are exceptions. ______ are allowed if LIMITED to the first ____ years of the loan or if the source of the prepayment funds is a refinancing by the lender or lender affiliate. They are also allowed if the amount of the periodic payment of principal, interest, or BOTH will NOT change at any time during the first _____ years of the loan. NOTE: Prepayment penalties may also be ALLOWED in cases where the borrower’s debt-to-income ratio does NOT exceed ____%.
A. Prepayment Penalties
B. Two
C. Four
D. 50%
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Loan Terms Per Regulation Z of TILA:
________, including any provision that enables the creditor to call the loan due before maturity. Only certain behavior of the consumer would permit the lender to call the loan; for example, fraud, material misrepresentation, default, or damage to the security property.
A. Demand Clauses
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
______ proceeds from home improvement loans to ANYONE other than the borrower, jointly to the borrower and the home improvement contractor, or, in some instances, to a third-party escrow agent as established by written agreement between the borrower, the creditor, and the contractor.
A. Disburse
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Sell or otherwise _____ the loan without furnishing the following statement to the purchaser or assignee:
“Notice: This is a mortgage subject to special rules under the federal Truth in Lending Act. Purchasers or assignees of this mortgage could be LIABLE for all claims and defenses with respect to the mortgage that the borrower could ASSERT against the creditor.”
A. Assign
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Refinance a high-cost loan into another high-cost loan within the first ____ months of origination unless the new loan is in the borrower’s best interest. The prohibition ALSO applies to assignees holding or servicing the loan.
A. 12 Months
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Grant loans solely on the collateral value of the borrower’s property WITHOUT regard to the borrower’s ability to _____ the loan.
A. Repay
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Extend credit without REQUIRED certification of pre-loan ______.
A. Counseling
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Recommend _______ on an existing loan to be refinanced by a high-cost mortgage loan.
A. Defaulting
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Charge any FEES to modify, defer, renew, _______, or amend a high-cost mortgage.
A. Extend
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
Assess late FEES in EXCESS of _____ percent of past due payments or pyramid late fees.
A. 4%
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
______ a FEE for generating payoff statements, with limited exceptions.
A. Charge
Home Ownership and Equity
Protection Act (HOEPA): Prohibited Acts and Practices Per Regulation Z of TILA:
Prohibited acts or practices for high-cost loans], creditors granting loans meeting HOEPA criteria may NOT:
_____ lender points and fees into the loan; however, bona fide ______ charges may be financed into the loan.
A. Finance
B. Third-Party
Home Ownership and Equity
Protection Act (HOEPA):
Per Regulation Z of TILA:
Verifying Repayment Ability:
Creditors may _____ grant loans solely based on the collateral value of the borrower’s property without regard to the borrower’s ability to repay the loan, including the consumer’s current and reasonably expected income, employment, assets other than the collateral, current obligations, and mortgage-related obligations, which include expected property taxes, premiums for mortgage-related insurance required by the creditor, and similar expenses.
A. NOT
Home Ownership and Equity
Protection Act (HOEPA):
Per Regulation Z of TILA:
Verifying Repayment Ability:
Although HOEPA’s ability to repay rules have similar requirements to the Dodd-Frank Act ability to repay requirements for Qualified Mortgages, they are _______ the same.
Income and assets can include:
• Expected income or assets
• Tax returns and W-2s
• Payroll receipts
• Financial institution records
• Other third-party documents that provide reasonably reliable evidence of the consumer’s income or assets
The amounts the creditor uses to verify the repayment ability cannot be materially greater than the amounts the creditor could have verified when the loan was consummated.
A. NOT
Home Ownership and Equity
Protection Act (HOEPA):
Per Regulation Z of TILA:
Verifying Repayment Ability:
The lender must determine the borrower’s repayment ability using the largest payment of principal and interest scheduled in the FIRST ____ years following consummation. The creditor must also consider the current obligations and mortgage-related obligations and assess the borrower’s repayment ability, taking into account at least _____ of the following:
• The ratio of total debt obligations to _____
• The income the consumer will ____ AFTER paying debt obligations
A. Five
B. One
C. Income
D. Have
Home Ownership and Equity
Protection Act (HOEPA):
Per Regulation Z of TILA:
Verifying Repayment Ability:
A creditor is NOT presumed to be in COMPLIANCE if the regular periodic payments for the FIRST ______ years of the transaction would cause the principal balance to INCREASE or if the term of the loan is LESS THAN _____ years and the regular periodic payments when aggregated do NOT fully AMORTIZE the outstanding principal balance.
A. Five
B. Five