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Debt Consolidation Loan: HPML Escrow Rule

Answered by: 
Randy Carey

Question: 
I have a borrower that is doing a debt consolidation loan. Part of the collateral consists of his parents​'​ ag land that also includes a house. There is a mortgage for the full value of the property and currently there are other loans that add up to about 40% of the mortgage amount. This loan would be using the same mortgage and not filing a new mortgage. Would the HPML escrow rule come into place if we are using a home equity rate that is going over the 1.50% threshold since there is only 1 mortgage on the property. Also - the borrower and the owner of the collateral are 2 different people - if that makes a difference.
Answer: 

It is not his principal dwelling, so HPML will not apply unless the parents are also on the loan and the house is their principal dwelling.

1026.35(a) Definitions. For purposes of this section:

(1) "Higher-priced mortgage loan" means a closed-end consumer credit transaction secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set:

First published on 10/02/2016

Filed under: 
Lending
Filed under lending as: 
Real Estate Lending
HPML

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