What percentage of the loan amount makes it a "high cost loan" under HOEPA?

A "high cost loan" under the Home Ownership and Equity Protection Act (HOEPA) is defined primarily by the interest rates and fees associated with the loan. Specifically, one of the criteria for this classification is the presence of closing costs and points that exceed a certain percentage of the total loan amount. When the fees and points exceed 5% of the loan amount, the loan is deemed high cost.

This regulation aims to protect consumers from potentially predatory lending practices by ensuring that borrowers are informed when they are entering into loans that carry additional risks. The 5% threshold serves as a significant indicator for lenders and borrowers alike to assess the affordability and potential danger of becoming financially overburdened.

Understanding this threshold is essential for mortgage loan officers and other professionals in the real estate industry, as it directly impacts pricing strategies and aligns with regulatory compliance aimed at safeguarding consumer interests.