Small Creditor – Higher Priced Covered Transactions

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    1026.43 (b)( 4) states ” Higher-priced covered transaction means a covered transaction with an APR that exceeds the APOR for a comparable transaction as of the date the interest rate is set by 1.5 % or more for a 1st lien other than a qualified mortgage under (e)(5),(e)(6) or(f) of this section; … by 3.5 % or more percentage points for a 1st lien covered transaction that is a qualified mortgage under (e)(5) ( small creditor)….

    My Question is if we are a small creditor, would the loan would become a HPCT at 3.5 % or more above the APOR and escrow would be required that that point not at the 1.5 % or more about the APOR under other bureau rules correct?


    HPML has its own triggers and HPML escrow has some exemptions. The HPCT threshold does not affect the HPML triggers. If your loan is 1.5% or more above the APOR on a first lien transaction subject to the HPML rules then you are required to escrow unless you meet one of the HPML escrow exemptions. The HPCT status indicates whether or not you will attain a safe harbor or rebuttable presumption of compliance for your QM. If your loan is NOT a HPCT and you meet the QM requirements you have a safe harbor; if it is a HPCT and you meet the QM requirements then you have a rebuttable presumption of compliance. As a small creditor under (e)(5), (e)(6), or (f) of 1026.43 you are given more room for a safe harbor – the definition of the HPCT gives small creditors up to 3.5% or more above the APOR before it becomes a HPCT. Again, HPCT won’t affect your escrow requirements under the HPML rules.

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