What determines HPML Classification?

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Question:

I have a balloon note that has matured. It had credit life. The loan will be renewed with credit life. Is it considered a HPML because we are financing the premiums?

Answer:

You have two sections of Reg Z to be concerned with.

226.32 addresses the APR and Fees & Charges thresholds and restriction for HOEPA loans. Financed credit insurance premiums are considered in calculating the Fee & Charges threshold for HOEPA.

226.35 addresses the APR thresholds and restrictions for HPMLs.

Financing the premiums may cause the loan to be subject to HOEPA, but as long as the APR is below the applicable thresholds outlined in 226.35 it would not be a HPML.

First published on BankersOnline.com 3/14/11