Finance
Predatory lending practices prohibited by the Home Ownership and Equity Protection Act (HOEPA) include:
ACharging a standard origination fee
BLoan flipping, equity stripping, and excessive fees on high-cost mortgage loans✓ Correct
CRequiring a minimum down payment
DSetting a fixed interest rate
Explanation
HOEPA targets predatory practices on high-cost mortgage loans including loan flipping (repeatedly refinancing to generate fees), equity stripping (using home equity for unnecessary fees), balloon payment loans to vulnerable borrowers, and other abusive terms.
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Key Terms to Know
Discount Points
Prepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
Private Mortgage Insurance (PMI)Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Math Concepts
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