Revised Dollar Amount and Thresholds Under Federal High-Cost and Qualified Mortgage Provisions
The Consumer Financial Protection Bureau (“CFPB”) issued a final rule amending the high-cost mortgage thresholds and the qualified mortgage thresholds in Regulation Z. The amendments are effective January 1, 2024.
HOEPA/High-Cost Mortgage Threshold
Under Regulation Z, certain loans with points and fees exceeding specified thresholds are considered “high-cost mortgages.” The thresholds for 2024 are: (1) five percent (5%) if the loan amount is $26,092 or more; and (2) the lesser of eight percent (8%) or $1,305 if the loan amount is less than $26,092. These revised dollar amounts are effective January 1, 2024.
Ability to Repay/Qualified Mortgage Threshold
Regulation Z also provides that a loan is a “qualified mortgage” if, among other requirements, the total points and fees do not exceed certain thresholds. The points and fees thresholds for the “qualified mortgage” rule are also subject to annual adjustment based on inflation.
Effective January 1, 2024, for all categories of qualified mortgages total points and fees must not exceed:
• 3% of the total loan amount for a loan amount greater than or equal to $130,461;
• $3,914 for a loan amount greater than or equal to $78,277, but less than $130,461;
• 5% of the total loan amount for a loan greater than or equal to $26,092, but less than $78,277;
• $1,305 for a loan amount greater than or equal to $16,308, but less than $26,092; and
• 8% of the total loan amount for a loan amount less than $16,308.
Effective January 1, 2024, for qualified mortgages under the General QM loan definition, the thresholds for the spread between the APR and APOR will be as follows:
• 2.25% or more for a first lien covered transaction with a loan amount greater than or equal to $130,461;
• 3.5% or more for a first lien covered transaction with a loan amount greater than or equal to $78,277 but less than $130,461;
• 6.5% or more for a first lien covered transaction with a loan amount less than $78,277;
• 6.5% or more for a first lien covered transaction secured by a manufactured home with a loan amount less than $130,461;
• 3.5% or more for a subordinate lien covered transaction with a loan amount greater than or equal to $78,277;
• 6.5% or more for a subordinate lien covered transaction with a loan amount less than $78,277.
Appraisals for Higher-Priced Mortgage Loans Exemption Threshold Adjustment
The Consumer Financial Protection Bureau, Federal Reserve Board, and Office of the Comptroller of the Currency announced the threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans will increase from $31,000 to $32,400.
Under the Truth in Lending Act, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, higher-priced mortgage loans must satisfy certain special appraisal requirements, unless exempt. An extension of credit is exempt if equal to or less than the applicable threshold amount as adjusted every year to reflect increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers as of June 1 of the preceding year.
Effective January 1, 2024, the exemption threshold will increase from $31,000 to $32,400.
Dollar Threshold Adjustments in Regulation Z for Determining Exempt Transactions
The Consumer Financial Protection Bureau and the Federal Reserve Board announced final rules amending the official interpretations for Regulation Z related to the dollar threshold for exempt consumer credit transactions.
An extension of credit that exceeds the applicable threshold amount or has an express written commitment to extend credit in excess of the applicable threshold amount is exempt from the provisions of Regulation Z. This exemption does not apply to: (1) loans secured by real property, or personal property used as the principal dwelling of the consumer; or (2) private education loans.
The exemption threshold is adjusted annually. Effective January 1, 2024, the exemption threshold amount will increase from $66,400 to $69,500.
FHFA Announces GSE Conforming Loan Limits for 2024
The Federal Housing Finance Agency (“FHFA”) has announced that the maximum confirming loan limit for first mortgages secured by one-unit properties acquired by Fannie Mae and Freddie Mac in 2024 will be $766,550, with the exception of several higher-cost areas where higher loan limits will be in effect.
A list of counties and their corresponding limits is available at fhfa.gov.