At least 3 business days before a loan is finalized, there are certain disclosures a creditor is required under federal law to make:
- The APR
- The amount of regular payments, including any large final payments
- The loan amount
- A written notice telling the borrower that the loan does not have to be completed even after receiving the disclosures and signing the loan application. You have until 3 days after receiving the disclosure to sign the loan
- A notice that the creditor could foreclose on the property if you do not make timely payments
What Types of Loans Does the HOEPA Apply to?
The following types of loans are covered under the Act:
- If a first mortgage on the property – where the APR exceeds by 8 percentage points the rates on Treasury securities of comparable maturity
- If a second mortgage on the property – where the APR exceeds by 10 percentage points the rates on Treasury securities of comparable maturity
- Total fees exceeding $499 (may be adjusted by the Federal Reserves Board) or 8% of the total loan amount
What Is My Creditor Prohibited from Doing under the HOEPA?
There are number of practices that a creditor is prohibited from engaging in under the HOEPA:
- Charging a large final payment that is more than double the regular monthly payments
- Making the monthly payments smaller and smaller so that your loan takes longer and longer to pay off and your principal debt grows larger
- Charging default interest rates that are higher than the pre-default rates
- If organizing a repayment schedule, the creditor cannot consolidate more than 2 periodic payments that are supposed to be paid in advance from the proceeds of the loan
- Any kind of clause that allows payment on demand, unless the clause does not come into play until the borrower has committed some kind of fraud or breach of contract
- Making loans without taking into account the borrower’s ability to repay the loan
- Refinance a loan covered under HOEPA into another HOEPA within the first 12 months of finalizing the first loan, unless it is in the borrower’s best interest
What Should I Do if I Think My Creditor Has Violated the HOEPA?
You will probably want to contact a bankcruptcy attorney who has experience in dealing with lender discrimination and redlining. You may be able to sue your creditor and recover statutory and actual damages, as well as have the loan rescinded for up to three years. Your attorney will be able to advise you of your rights as a borrower and help you plan a proper course of action.