October 3, 2013 at 6:17 pm EDT #4023kschliebeMember
I am trying to sort out the difference between higher priced covered transactions and higher priced mortgage loans…
We do not meet the definition of small creditor, so the 3.5 or more percentage point difference in 1026.43(b)(4) on certain 1st lien covered transactions doesn’t affect us. Does that mean HPCT would essentially be the same as HPML for our bank?October 4, 2013 at 12:01 pm EDT #4026rcooperMember
They have slightly different thresholds. The big difference is HPML is principal dwelling secured and HPCT is dwelling secured. In addition, there is an additional threshold for jumbo HPMLs. So, just because one applies won’t always mean that both apply.
Higher Priced Mortgage Loan (HPML)
Closed end consumer credit secured by a principal dwelling with APR that exceeds the APOR by:
• 1.5% or more – first lien
• 2.5% or more – first lien jumbo
• 3.5% or more – subordinate lien
Higher Priced Covered Transaction (HPCT) 12 CFR 1026.43(b)(4):
Consumer credit secured by a dwelling with APR that exceeds the APOR by:
• 1.5% or more – first lien loans
• 3.5% or more – subordinate lien loansOctober 4, 2013 at 12:48 pm EDT #4027kschliebeMember
Got it. Thanks! 🙂February 26, 2014 at 10:48 am EST #5477avolentineMember
We meet the definition of small creditor and we are confused about HPCT and HPML. Are principal dwellings AND all other dwellings covered under HPCT?
For example, we have a 1st lien primary residence loan that is a Small Creditor QM priced at 5.0% when the APOR is 2.90% so we have priced it 2.10% over the APOR. Does this make it a HPML but not a HPCT? If so is the only requirement that we would have to escrow? (We aren’t exempt from the Small Servicer Escrow Rules as we were escrowing prior to 1/13).
Thank you!February 28, 2014 at 9:43 am EST #5485rcooperMember
You’ll look to the scope of 1026.43 to determine what transactions are covered. But, yes, typically a dwelling secured loan is covered unless one of the exemptions apply (Some exemptions include: HELOCs, loans secured by time share, reverse mortgage, temporary/bridge loans, construction phase of 12mths or less of constr./perm, and others you can find here: https://www.ecfr.gov/cgi-bin/text-idx?SID=c9cc74255c39fcc4f7169558a682f32d&node=12:184.108.40.206.220.127.116.11&rgn=div8).
If you have a loan secured by a principal dwelling that exceeds the APOR by 2.10% and you have qualified it under the Small Creditor QM option then it would not be HPCT since it does not meet/exceed the 3.5% threshold; so you would receive the QM Safe Harbor. However, since it is a closed end, principal dwelling secured transaction that does exceed the 1.5% HPML threshold for 1st lien transactions then it would be an HPML and you would need to comply with the HPML requirements including the escrow and appraisal rules unless one of the exemptions to those specific rules applies. (You can find the HPML rules and exemption here: https://www.ecfr.gov/cgi-bin/text-idx?SID=c9cc74255c39fcc4f7169558a682f32d&node=12:18.104.22.168.22.214.171.124&rgn=div8)
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