The Home Ownership and Equity Protection Act (“HOEPA”) is a federal consumer protection law enacted in 1994 as an amendment to the Truth in Lending Act (“TILA”) to address abusive lending practices associated with certain high-cost mortgage loans. HOEPA establishes special disclosure requirements and substantive protections for borrowers obtaining mortgages that exceed specified thresholds for interest rates or fees. Loans covered by HOEPA are commonly referred to as “high-cost mortgages.” The law requires lenders to provide additional disclosures informing borrowers about the loan’s high-cost status and prohibits certain predatory lending practices, including excessive fees, balloon payments in many cases, negative amortization, and making loans without regard to a borrower’s ability to repay.
For Mortgage Loan Originators (“MLOs”), HOEPA is significant because it imposes heightened compliance obligations when originating loans that may qualify as high-cost mortgages under federal thresholds. MLOs must carefully evaluate loan terms, fees, and annual percentage rates (“APR”) to determine whether HOEPA applies and ensure that all required disclosures and consumer protections are properly provided. The law is intended to protect consumers—particularly vulnerable borrowers—from unfair, deceptive, or abusive mortgage practices. Violations of HOEPA can result in severe regulatory penalties, borrower lawsuits, rescission rights, and reputational harm, making compliance with high-cost mortgage rules an important responsibility for mortgage professionals and lending institutions.
