How is a residential loan classified if the APR exceeds the APOR significantly?

A residential loan is classified as a Higher Priced Mortgage Loan (HPML) when the Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) significantly. This classification exists to provide additional protections for borrowers who may be facing higher interest rates. The regulation stipulates certain thresholds to determine whether a loan is considered higher-priced based on its APR compared to the APOR.

The significance of this classification lies in the added consumer protections that come with HPMLs. For example, lenders must provide borrowers with specific disclosures, and certain underwriting requirements may be enforced to ensure borrowers are treated fairly and transparently.

Understanding this classification is essential for mortgage professionals, as it impacts the way loans are serviced and the regulatory framework within which they operate. Since the question specifically mentions the relationship between APR and APOR, this highlights the importance of monitoring these rates to ensure compliance with the relevant lending regulations.