September 23, 1994 - Home Ownership and Equity Protection Act

Policy Name: Home Ownership and Equity Protection Act of 1994, Subtitle B of Title I of the Riegle Community Development and Regulatory Improvement Act of 1994, (H.R. 3153)

Date: Effective September 23, 1994

The Home Ownership and Equity Protection Act of 1994 (HOEPA) was an attempt to address predatory practices in the home loan industry by providing borrowers with protections against loans with excessive fees and interest rates. HOEPA amended the Truth in Lending Act to establish new disclosure requirements and protections on certain closed-end mortgages that had rates or fees above a certain threshold.

HOEPA defined a loan to be “high-cost” if a loan had an annual percentage rate 10% above the yield on a Treasury security with comparable maturity or had its total fees and points exceed $400, or 8% of the loan. From these triggers, HOEPA established protective provisions for high-cost home loans, including additional disclosure for borrowers, prohibition of prepayment penalties, prohibition of negative amortization, and the requirement that lenders determine a consumer’s ability to repay.

The legislation further granted the Federal Reserve the power to adjust and enforce these triggers, as well as “discretionary regulatory authority.”