THE CFPB’S VERSION OF THE HOME OWNERSHIP AND EQUITY PROTECTION ACT

Adam Jaskievic, Esq.¹

Adam Jaskievic Adam Jaskievic is a Massachusetts based attorney specializing in mortgage banking regulatory compliance. After graduating from Bates College and Boston University School of Law, Adam began his in-house career at community bank specializing in mortgage lending. Since then, Adam has continued to focus his practice on mortgage banking regulations pertaining to retail, wholesale, and correspondent platforms.

On January 10th of this year, mortgage lenders across the United States began their workday operating under a significantly expanded regulatory regime created by the Consumer Finance Protection Bureau ("CFPB" or the "Bureau"). The CFPB spent the better part of 2012 issuing final rules aimed at implementing various mortgage origination and servicing requirements within the Dodd-Frank Wall Street Reform and Consumer Protection Act. While the CFPB ultimately implemented what it considered eight major new sets of rules, only a select few of those received the bulk of the attention from industry experts and accounted for the bulk of anxiety from the industry’s lenders. Many of the rules seemed to fly beneath the radar for most of the year. The Bureau’s rule implementing the High-Cost Mortgage and Homeownership Counseling Amendments to the Truth in Lending Act and Real Estate Settlement Procedures Act was one of those rules that was often overlooked. While the true extent to which the new Home Ownership Protection Act ("HOEPA") amendments are affecting the industry has yet to be fully understood, one thing is certain: far more mortgage loans are triggering HOEPA requirements now than before. These loans, historically referred to as "High-Cost" or "Section 32" loans, carry with them heightened disclosure and operational requirements as well as greater liability. Lenders wishing to continue to originate these loans, as well as originators wishing to expand their product offerings in an attempt to attract more borrowers in a shrinking market, are faced with operational hurdles and strict requirements when structuring these loans. This article takes a close look at the requirements of this often overlooked rule that went into effect earlier this year.

As with many other rules issued by the CFPB, the HOEPA rule actually implemented changes to multiple regulations, including section 1026.32: Requirements for High-Cost Mortgages of the Truth-In-Lending Act ("TILA" or "Reg. Z"), as well as section 1024.20: List of Homeownership Counseling Services of the Real Estate Settlement Procedures Act ("RESPA" or "Reg. X").² The 1026.32 amendments represent the bulk of the changes under the HOEPA final rule and also constitute the majority of the compliance burdens facing lenders as a result of the rules implementation. While the 1024.20 amendments affect a far larger segment of loans throughout the industry, the overall burden lenders have faced in complying with this aspect of the new HOEPA rule has been far less significant. The High-Cost Amendments shall be discussed first, followed by the Counseling Amendments.