A borrower refinances their home with a new loan of $200,000. The existing mortgage balance being paid off is $175,000, and the borrower receives $20,000 in cash. Total points and fees are $1,200. What is the HOEPA points and fees percentage?
Correct Answer
A) 6% ($1,200 ÷ $20,000)
For refinance transactions where cash is advanced to the borrower, HOEPA requires calculating points and fees as a percentage of the cash advanced ($20,000), not the total loan amount. This results in 6% ($1,200 ÷ $20,000), which exceeds the 5% trigger.
Why This Is the Correct Answer
For refinance transactions where cash is advanced to the borrower, HOEPA requires calculating points and fees as a percentage of the cash advanced ($20,000), not the total loan amount. This results in 6% ($1,200 ÷ $20,000), which exceeds the 5% trigger.
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