What is the Home Ownership and Equity Protection Act?

The Home Ownership and Equity Protection Act (HOEPA) is a federal law created to protect homeowners and borrowers in the state of Nebraska and across the United States. This law was passed in 1994 and is enforced by the Federal Reserve Board. HOEPA protects borrowers from predatory practices by limiting certain high-cost loans and restricting specific loan features. High-cost loans are defined as those that have a total points and fees that exceed the greater of 8 percent of the loan amount or $500. Loan features that are restricted include prepayment penalties and negative amortization. Under HOEPA, lenders are required to meet certain disclosure requirements before signing a contract. Borrowers must be given a “good faith estimate” of total fees and points they will be charged for the loan. This estimate must be provided in writing no later than three business days after the lender receives the borrower’s application. Borrowers must also receive a notice warning them of the risks of high-cost loans and providing them with information on other potential loan programs. HOEPA was created with the intention of providing greater consumer protection for borrowers in Nebraska and across the United States. This law has been successful in helping to limit predatory practices by lenders, and has allowed borrowers to make informed decisions when choosing mortgage loans.

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What is the Home Ownership and Equity Protection Act?

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