For a first lien loan to be classified as a Higher Priced Mortgage Loan (HPML), the APR must exceed the Average Prime Offer Rate (APOR) by what percentage or greater?

A Higher Priced Mortgage Loan (HPML) is defined by regulatory guidelines that set specific thresholds regarding the loan's Annual Percentage Rate (APR) in relation to the Average Prime Offer Rate (APOR). For a first lien loan, to be classified as an HPML, the APR must exceed the APOR by 1.5 percentage points or more. This classification is crucial because it triggers additional consumer protections intended to safeguard borrowers from predatory lending practices.

The significance of this threshold lies in its role in identifying loans that carry a higher risk for borrowers due to the associated costs of borrowing. By setting the bar at 1.5%, regulators aim to ensure that borrowers who take out loans above this threshold are given extra disclosures and protections, which can help them make more informed financial decisions.

Understanding this distinction is vital for mortgage professionals, as it greatly impacts compliance with federal regulations and the overall protection of consumer interests in the mortgage lending process.