federal laws 2

• 1. promote the informed use of credit by clearly disclosing terms & costs of credit
• 2. help consumers better compare the terms of loans offered by various creditors through early disclosures
• 3. provide consumers with the right to cancel (rescind) certain loans that involve liens on primary dwellings.

1)rules not cover loans to buy or build a home, reverse mortgages or revolving home equity lines of credit

The homeownership and Equity Protection Act (HOEPA)

When the total points and fees payable by the consumer at or before closing, exceed larger of $579 or 8% of the total loan amount.

• 1. A written notice stating that the loan need not be completed (3 busn days cooling period to decide whether to sign the Section 32 disclosure)
• 2. The notice must warn the borrower the creditor will have a mortgage on the home
• 3. lender must disclosure the APR

• 1. All ballon payment
• 2. negative amortization
• 3. default interest rate higher than pre-default rates
• 4. most prepayment penalties
• 5. a due on demand clause
• 6. refinance into another HOEPA loan within 12 months unless new loan is in the best interest of borrower
• 7. open-end loan (home equity line of credit)

Any mortgage (purchased or non-purchase money) secured by a consumer's principal dwelling with an APR exceeding the "Average Prime Offer Rate" (APOR), on prime loans by at lest 1.5% points on 1st lien loans & 3.5% points on subordinate-lien loans.

• 1. engaging in a pattern & practice of relying on the collateral securing the loan without regard to the consumer's ability to repay the loan
• 2. relying on a consumer's income & assets without verifying such amounts through reasonable reliable third-party documents
• 3. imposing any pre-payment penalty if the consumer's payment can change in the 1st 4 years of the loan term.
• 4 originating 1st lien, higher priced loans, without establishing an escrow acount for property taxes & homeowners insurance.