HOEPA Homeownership Counseling Rule
Final Interpretive Rule Issued November 8, 2013
The CFPB issued this final rule to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act’s amendments to the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The final rule amends Regulation Z (TILA) by expanding the types of mortgage loans that are subject to the protections of the Home Ownership and Equity Protections Act of 1994 (HOEPA), revising and expanding the tests for coverage under HOEPA, and imposing additional restrictions on mortgages that are covered by HOEPA, including a pre-loan counseling requirement. The final rule also amends Regulation Z and Regulation X (RESPA) by imposing certain other requirements related to homeownership counseling, including a requirement that consumers receive information about homeownership counseling providers.
Counseling Requirement for Non-High-Cost Mortgages
Within three business days after a lender, mortgage broker, or dealer receives an application or information sufficient to complete an application, the lender must provide the applicant with a clear and conspicuous written list of homeownership counseling organizations that provide relevant counseling services in the loan applicant’s location. The list is to be provided along with a home buying booklet prepared by the CFPB (similar to the booklet previously distributed by HUD). The list may be combined and provided with other Regulation Z mortgage disclosures. The list may be provided by mail or electronically, subject to the e-SIGN requirements.
The lender is not required to provide the list if, before the end of the three-business-day period, the lender denies the application or the loan applicant withdraws the application. For a HELOC, the list may be provided with the timing and delivery requirements in Regulation Z, 12 CFR 1026.40(b).
If there is more than one lender, only one list needs to be provided. If there is more than one applicant, only one list needs to be provided with the applicant with primary liability of the loan.
Lender Requirements for Counseling First-time Homebuyers on Negative Amortization
Lenders may not extend credit to a first-time borrower in connection with a closed-end transaction secured by a dwelling that may result in negative amortization unless the creditor receives documentation that the consumer has obtained homeownership counseling from a counseling organization or counselor certified or approved by HUD. The lender may not steer a consumer to a particular counselor.
The counseling required must include information regarding the risks and consequences of negative amortization. Examples of documentation indicating that the requisite counseling has been provided include a certificate of counseling letter, or email from a HUD-certified or approved counselor.