In HOEPA determinations, HOEPA uses the threshold where APR is how many percentage points over APOR?

In HOEPA determinations, HOEPA uses the threshold where APR is how many percentage points over APOR?

• A. 6.5 percentage points over APOR
• B. 5 percentage points over APOR
• C. 2.5 percentage points over APOR
• D. 10 percentage points over APOR

Answer: (A)

The key idea here is how HOEPA defines a high-cost loan by comparing the loan’s APR to the market rate. APOR is the Average Prime Offer Rate—the benchmark rate shown for prime borrowers, published for different loan types and terms. To determine if a loan falls under HOEPA’s protections, you look at the APR at the time of closing and see how far it exceeds APOR for that loan type. If the APR is 6.5 percentage points higher than APOR, the loan is considered a HOEPA high-cost loan. This threshold is what triggers HOEPA’s extra disclosures, restrictions, and counseling requirements. The other numbers listed (5, 2.5, or 10 percentage points) are not the HOEPA threshold, so they don’t place a loan into HOEPA's high-cost category.

The key idea here is how HOEPA defines a high-cost loan by comparing the loan’s APR to the market rate. APOR is the Average Prime Offer Rate—the benchmark rate shown for prime borrowers, published for different loan types and terms. To determine if a loan falls under HOEPA’s protections, you look at the APR at the time of closing and see how far it exceeds APOR for that loan type. If the APR is 6.5 percentage points higher than APOR, the loan is considered a HOEPA high-cost loan. This threshold is what triggers HOEPA’s extra disclosures, restrictions, and counseling requirements. The other numbers listed (5, 2.5, or 10 percentage points) are not the HOEPA threshold, so they don’t place a loan into HOEPA's high-cost category.