What is Section 32 of Regulation Z?

Section 32 of Regulation Z implements the Home Ownership and Equity Protection Act of 1994 (HOEPA). HOEPA protects consumers from deceptive and unfair practices in home equity lending by establishing specific disclosure requirements for certain mortgages that have high rates of interest or assess high fees and points.

How many bona fide discount points may be excluded from the calculated finance charges when the transaction’s interest rate before applying the discount points does not exceed APOR by more than two percentage points?

two bona
The creditor may exclude two bona fide discount points from the points and fees calculation because the rate from which the discounted rate was derived (6.5 percent) exceeded the average prime offer rate for a comparable transaction as of the date the rate on the transaction was set (5.5 percent) by only 1 percentage …

How many of the three threshold tests must be met for a loan to be defined as a high-cost?

In general, for a first-lien mortgage, a loan is “higher-priced” if its APR exceeds the APOR by 1.5 percent or more. For a subordinate mortgage, a loan is “higher-priced” if its APR exceeds the APOR by 3.5 percent.

What disclosure is required with a high-cost loan?

A creditor must provide a written disclosure to the consumer at least three business days before a loan closing or account opening of a high-cost mortgage. The rule requires that the disclosure contain new specific information and wording about the loan.

What is the difference between section 32 and 35?

HOEPA Section 32 loans must also meet the same APR and APOR criteria as Section 35 loans, but Section 32 loans also include these three additional criteria, which do not apply to Section 35 loans: Total lender/broker points and fees are greater than 5 percent of the total loan amount.

What is Reg Z in banking?

Regulation Z prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators. The goal of the amendments is to protect consumers in the mortgage market from unfair practices involving compensation paid to loan originators.

How do you know if discount points are bona fide?

In simpler terms, a discount is considered “bona fide” if the discount fee paid by the borrower corresponds to a reduction in interest rate, but the ratio (rate reduction vs. discount fee) must conform to “well established industry practices”.

What is section 32 high-cost loan?

The Home Ownership and Equity Protection Act (HOEPA) of 1994 defines high-cost mortgages. These also are known as Section 32 mortgages because Section 32 of Regulation Z of the federal Truth in Lending Act implements the law. It covers certain mortgage transactions that involve the borrower’s primary residence.

What is not allowed under HOEPA?

Balloon payments are generally banned, unless they are to account for the seasonal or irregular income of the borrower, they are part of a short-term bridge loan (12 months or less), or they are made by small creditors (less than $2 billion in assets5 and originating fewer than 2,000 loans per year, excluding portfolio …

What types of loans are exempt from HPML?

Loans secured by new manufactured homes and land are exempt from the requirement that the appraisal include a physical inspection of the interior of the property, but will be subject to all other HPML appraisal requirements. A new manufactured home is defined as one that has not previously been occupied.

What is Section 35 HPML?

Higher-Priced Mortgage Loans (HPMLs) Section 35 defines APOR as the “annual percentage rate that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgage transactions that have low-risk pricing characteristics.”

What types of loans does Reg Z apply to?

Regulation Z is part of the Truth in Lending Act of 1968 and applies to home mortgages, home equity lines of credit, reverse mortgages, credit cards, installment loans and certain student loans.

What is the 12 CFR Part 1026 Regulation Z?

Interactive Bureau Regulations 12 CFR Part 1026 – Truth in Lending (Regulation Z) Most recently amended March 1, 2021 Regulation Z protects people when they use consumer credit.

What do you need to know about Regulation Z?

Regulation Z protects people when they use consumer credit. Additional information about Integrated Mortgage Disclosures under the Real Estate Settlement Procedures Act (Regulation X) and the Truth In Lending Act (Regulation Z)

What are the rules of banking regulation 1026?

Sections of the regulation with pending amendments are indicated below with an asterisk (*). 1026.2 — Definitions and rules of construction. 1026.3 — Exempt transactions. 1026.4 — Finance charge. 1026.5—General disclosure requirements. 1026.6—Account-opening disclosures.

What are the prohibitions of § 1026.36?

§ 1026.36 Prohibited acts or practices and certain requirements for credit secured by a dwelling. 1. Meaning of loan originator. i. General.