Written By: Joel Palmer, Op-Ed Writer
The Consumer Financial Protection Bureau (CFPB) has released its annual thresholds for regulations that fall under the Truth in Lending Act (TILA).
The bureau is required by law each year to re-calculate the dollar amounts for several provisions in Regulation Z, which implements TILA. The adjustments are based on the annual percentage change in the Consumer Price Index (CPI), which increased 2.2 percent as reported by the U.S. Bureau of Labor Statistics earlier this year.
The new amounts take effect on January 1, 2018.
The new thresholds cover:
• The minimum interest charge and safe harbor penalty fees under TILA and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) amendments to TILA
• The total loan amount and points and fees dollar trigger for high-cost mortgages under the Home Ownership and Equity Protection Act (HOEPA)
• The maximum points and fees for qualified mortgages under the Dodd-Frank Wall Street Reform and Consumer Protection Act
HOEPA was enacted in 1994 to address abusive practices in refinances and closed-end home equity loans with high interest rates or fees. The law requires special disclosure requirements and restrictions on loan terms for purchase-money mortgages, refinances, closed-end home equity loans and home equity lines of credit that meet the law’s threshold for what is considered a high-cost mortgage.
Effective January 1, the points and fees test under HOEPA will be $21,032. The adjusted points and fees dollar trigger will be $1,052. The previous thresholds were $20,000 and $1,000.
A loan transaction of $21,032 or more, with points and fees that exceed 5 percent of the total loan amount, will be considered a high-cost mortgage under HOEPA. In addition, when points and fees exceed either $1,052 or 8 percent of the total loan amount, the transaction will be considered a high cost mortgage, regardless of the loan amount.
The following items are included in calculating points and fees for HOEPA coverage:
• Closed-end credit transactions
• Open-end credit plans
• Participating fees payable at or before account opening
• Fees charged to draw on a home equity line of credit
• Point and fees calculation
• Finance charges
The new TILA thresholds also cover sections 1411 and 1412 of Dodd-Frank, which covers lenders’ obligation to determine a consumer’s ability to repay a mortgage while establishing liability protections for qualified mortgages.
The new 2018 maximum thresholds for what is considered a qualified mortgage are total points and fees that exceed:
• 3 percent of the total loan amount for loans of $105,158 or more
• $3,155 for a loan amount between $63,095 and $105,158
• 5 percent of the loan amount for loans between $21,032 and $63,095
• $1,052 for loans between $13,145 and $21,032
• 8 percent of the total loan amount for loans valued at less than $13,145
About the Author
As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.