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Circular Letters

Circular Letter 5557

January 8, 2002

To: All Member Banks and Others Concerned in the Third Federal Reserve District

Attention: Chief Executive Officers and Compliance Officers

Subject: FINAL RULE THAT ADOPTS AMENDMENTS TO REGULATION Z'S HOME OWNERSHIP AND EQUITY PROTECTION ACT (HOEPA)

Summary:

On December 14, 2001, the Federal Reserve Board approved the adoption of amendments to the provisions of Regulation Z that implement the Home Ownership and Equity Protection Act (HOEPA). The Board's amendments to Regulation Z broaden the scope of mortgage loans subject to HOEPA by adjusting the price triggers used to determine coverage under the act. The rate-based trigger is lowered by two percentage points for first-lien mortgage loans, with no change for subordinate-lien loans. The fee-based trigger is revised to include the cost of optional credit insurance and similar debt-protection products paid at closing. The amendments restrict certain acts and practices in connection with home-secured loans. For example, creditors may not engage in repeated refinancings of their HOEPA loans over a short time period when the transactions are not in the borrower's interest. The amendments also strengthen HOEPA's prohibition against extending credit without regard to consumers' repayment ability and enhance disclosures received by consumers before closing for HOEPA-covered loans.

Effective Date: The rule was effective December 20, 2001, the date that it was published in the Federal Register. Compliance is mandatory as of October 1, 2002.

Additional Information: A copy of the Board's notice is attached PDF Icon (104 KB, 37 pages). For additional information, contact the Regulations Assistance Unit at this Reserve Bank at (215) 574-6568 or Minh-Duc T. Le, Attorney; Daniel G. Lonergan, Counsel; or Jane E. Ahrens, Senior Counsel, Division of Consumer and Community Affairs, Board of Governors of the Federal Reserve System, at (202) 452-3667 or 452-2412.

Attachment: View the attachment. PDF Icon (104 KB, 37 pages).