Which item is NOT a HOEPA trigger?

Which item is NOT a HOEPA trigger?

• A. Points and Fees Trigger
• B. APR Trigger (APR is 6.5% over the APOR)
• C. Prepayment penalty longer than 3 years or more than 3% of loan amount
• D. Negative amortization

Answer: (D)

HOEPA triggers determine when a mortgage is classified as a high-cost loan and must follow extra disclosures and protections. The three main triggers focus on cost and terms: if the APR is significantly higher than the market (typically 6.5 percentage points above APOR for a first-lien loan), if the total points and fees at closing exceed a set threshold (commonly 5% of the loan amount), or if there’s a prepayment penalty lasting longer than three years or equal to or exceeding 3% of the loan amount. These thresholds are what raise a loan into HOEPA territory. Negative amortization, while a risky feature that HOEPA addresses in practice, is not used as one of these triggers to determine HOEPA status. It’s a problematic characteristic HOEPA rules can restrict, but it isn’t one of the trigger conditions that automatically qualify a loan as HOEPA. So, negative amortization is not a HOEPA trigger.

HOEPA triggers determine when a mortgage is classified as a high-cost loan and must follow extra disclosures and protections. The three main triggers focus on cost and terms: if the APR is significantly higher than the market (typically 6.5 percentage points above APOR for a first-lien loan), if the total points and fees at closing exceed a set threshold (commonly 5% of the loan amount), or if there’s a prepayment penalty lasting longer than three years or equal to or exceeding 3% of the loan amount. These thresholds are what raise a loan into HOEPA territory.

Negative amortization, while a risky feature that HOEPA addresses in practice, is not used as one of these triggers to determine HOEPA status. It’s a problematic characteristic HOEPA rules can restrict, but it isn’t one of the trigger conditions that automatically qualify a loan as HOEPA.

So, negative amortization is not a HOEPA trigger.