A lender is calculating HOEPA triggers for a refinance transaction where the borrower is paying off a $180,000 existing mortgage and receiving $25,000 cash back. The new loan amount is $205,000 with total points and fees of $8,500. What is the correct points and fees percentage for HOEPA evaluation?
Correct Answer
D) 34% ($8,500 ÷ $25,000)
Under HOEPA, for refinance transactions with cash to the borrower, points and fees are calculated as a percentage of the cash advanced. The $25,000 cash back is the denominator, making the percentage 34% ($8,500 ÷ $25,000), which exceeds the 5% trigger threshold.
Why This Is the Correct Answer
Under HOEPA, for refinance transactions with cash to the borrower, points and fees are calculated as a percentage of the cash advanced. The $25,000 cash back is the denominator, making the percentage 34% ($8,500 ÷ $25,000), which exceeds the 5% trigger threshold.
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