[Midwest Banker]

Under the 2018 requirements, what HOEPA code should be used for a purchased (code 6 action code) loan. Should it be “2” – if the loan was not high-cost at origination or “3” for not applicable?

Thank you

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[jholzknecht]

This is a question we have been asking the CFPB for several years. The issue is not addressed in Regulation C, the Official Interpretations, the Small Entity Compliance Guide or the 2018 Filing Instructions Guide. For purchased loans that are subject to HOEPA we encourage banks to try and determine HOEPA status (Code 1 High-Cost or Code 2 Not High-Cost) at the time the loan was originated. That can be very difficult to do, especially when trying to recreate the amount of the total points and fees. If the loan was not subject to HOEPA then enter Code 3 Not applicable.

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