All You Need to Know about Mortgage HOEPA Compliance

Home Ownership and Equity Protection Act (HOEPA) came into existence in 1994 to protect consumers from unscrupulous lending practices prevalent in the mortgage industry. It was intended to offer additional line of defence for mortgages with high fees and annual percentage rates.

With the implementation of Dodd-Frank Act, HOEPA was amended to increase the protection extended to borrowers and provide home owners with improved security. Let us discuss some of the principles of HOEPA that are pertinent to the present-age mortgage lending ecosystem.

  • Restrictions on high-cost mortgages were imposed, including ban on ballooning payments irrespective of the loan tenure
  • Prepayment penalties defined new limits for high-cost mortgages
  • Amended HOEPA took open-ended home-secured credit loans, such as home equity lines of credit, and home-purchase loans under their fold which were initially not included
  • Existing limits on points, fees and loan’s rate were reduced making loans into high-cost mortgages
  • Late fees imposed on loan before it is 15 days past due or late fees more than 4% of the past due amount is prohibited
  • Fees imposed on modification of loan has been removed
  • Lenders prohibited from provoking borrowers to default on their loans

While house refinance loans, close-ended home equity loans and open-ended credit plans come under HOEPA compliance, reverse mortgages and construction loans remain excluded from HOEPA coverage.

When Loan Comes Under Section-32

Lenders who provide loans under Section-32 are obligated to make disclosures to the borrower at least 3-days before the completion of loan process.

Here are some more disclosures that are required in addition to TILA mandate:

  • A notice in writing that the borrower is not obliged to complete the loan, even if they have already received the disclosures and signed the application. Borrowers are given 3 business days after receiving the disclosure to decide whether or not they want to go ahead with the loan agreement.
  • A lender must issue a written warning to the borrower that in an event they fail to make the payment towards their loan, they may lose their home and all the money invested in it.
  • The lenders must give the APR and payment amount in writing. If the borrower is taking a variable rate, then the lender must also give them in writing that their monthly payment and rate are subject to change.
  • They must also give the borrower in writing that if the information provided in the disclosure is inaccurate or outdated, then the lender will give a new disclosure with a three-day period for the borrower to thoroughly review new terms. However, consumers have the right to waive off that three-day period if they have an emergency.


The borrower has a right to sue the lender if they violate HOEPA requirements. The lawsuit will give the borrower right to recover actual and statutory damages, court costs and attorney fees. According to the law, violation of TILA’s high-fee/cost requirements can empower the borrower to cancel the loan.

Chances of violating HOEPA requirements gets eliminated when you work with experienced service providers like Expert Mortgage Assistance, who leverage their experience in handling HOEPA requirements to provide fool-proof solutions for your need. If you want to become HOEPA compliant and need an outsource mortgage processing support services partner to meet your compliance requirements, then talk to us today. Our experts will work closely with you to understand your business needs and fulfil them proficiently.

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