What Special Protections Are There for High-Cost Mortgages and Premium Mortgages?

What special protections are there for high-cost mortgages and premium mortgages?

A high-cost mortgage is a mortgage used to purchase a home, a home equity loan (or second mortgage or refinance ), or a HELOC that : is secured by your primary residence and whose annual percentage rate or APR ( or the points and charges applied) exceed certain limit amounts linked to market conditions. If you have a high-cost mortgage, you may have additional rights under a federal law called the Homeownership Protection and Foreclosure Act (HOEPA), and the CFPB has more information about your special rights . 

If instead you have a higher-priced mortgage with an APR higher than the benchmark rate called the Average Prime Offer Rate (the interest rate charged to borrowers with the best credit), you may have additional rights. You may have these rights if your higher-priced mortgage is used to buy a home, for a home equity loan, a second mortgage, or a refinance secured by your primary residence. These additional protections do not apply to Home Equity Lines of Credit or HELOCs . If you have a higher priced mortgage loan, the Consumer Financial Protection Bureau (CFPB) has more information about your rights .

Lending and Mortgage Practices That Can Harm You

If you take out a loan from a dishonest lender, you could lose your home and your money. Certain lenders target elderly, moderate-income, or credit-challenged homeowners and then try to take advantage of them using deceptive, unfair, or other illegal practices such as the following.

• Repeat lending: This is when the lender encourages you to repeatedly finance the loan, which often leads you to borrow more money. Every time you refinance, you pay additional fees and interest points, which increases your debt.
• Bundled Insurance – This occurs when the lender adds credit insurance or other insurance products that you may not need.
• Pig in a poke: This is when the lender offers you certain loan terms when you apply, and then pressures you to accept higher fees when you show up to sign to complete the deal.
• Stripping of your mortgage amortization: This involves practices that reduce the value of your home, for example, when the lender gives you a loan based on the mortgage amortization of your house, and not on your ability to repay. If you can't make the payments, you could end up losing your home.
• Non-traditional products include home equity loans that
  • have monthly payments that increase, either because they have variable interest rates or because the minimum payment does not cover the principal and interest owed,
  • have low monthly payments, but a high lump sum payment is due at the end of the loan term. If you can't make the balloon payment or refinance, you will face foreclosure and the loss of your home.

Harmful practices may also be found in the day-to-day servicing of your mortgage payments. There are several types of loan servicing abuse, for example, when the lender charges you incorrectly or fails to provide you with a complete and accurate account statement or itemize your payment amounts. Learn more about your rights when paying your mortgage payments.

Some of these harmful home equity lending practices violate federal credit laws related to disclosures about loan terms; debt collection and discrimination based on age, gender, marital status, race or nationality . You may also have additional rights under state law that may allow you to sue.

Report fraud

If you think your provider broke the law, you may want to contact the provider or servicer to tell them. At the same time, you may wish to contact an attorney.

You can also report fraud to:

• The attorney general of your state.
• The banking regulatory agency .
• The Federal Trade Commission (FTC) at ftc.gov .
• The Consumer Financial Protection Bureau (CFPB) .