A closed-end consumer mortgage secured by the principal dwelling is consummated in 2026, with no HOEPA exemption. Its regulatory total loan amount is $180,000 and its HOEPA points and fees are $9,900. The APR does not trigger coverage. Does the points-and-fees test independently make this a high-cost mortgage?
Correct Answer
C) High-cost: points and fees over 5% of the loan meet the test
C. The points-and-fees amount exceeds the applicable 5% threshold. $180,000 exceeds the 2026 indexed size threshold of $27,592. $9,900 / $180,000 = 5.5%; the 5% amount is $9,000, exceeded by $900. Scope and exceptions: Exactly 5% does not exceed this trigger. Use the regulatory total loan amount and points-and-fees definitions rather than the note amount or every closing cost. Coverage depends on the stated transaction scope and exclusions. Source: Section 1026.32(a)(1)(ii), (a)(2), (b); comment 32(a)(1)(ii)-3.xii — https://www.consumerfinance.gov/rules-policy/regulations/1026/32/
Why This Is the Correct Answer
C. The points-and-fees amount exceeds the applicable 5% threshold. $180,000 exceeds the 2026 indexed size threshold of $27,592. $9,900 / $180,000 = 5.5%; the 5% amount is $9,000, exceeded by $900. Scope and exceptions: Exactly 5% does not exceed this trigger. Use the regulatory total loan amount and points-and-fees definitions rather than the note amount or every closing cost. Coverage depends on the stated transaction scope and exclusions.
Why the Other Options Are Wrong
Option A: Not high-cost: the points and fees test is 8% of the loan amount
Eight percent belongs to the smaller-loan branch, not this loan.
Option B: High-cost: any loan with points and fees over $5,000 is covered
There is no universal $5,000 trigger.
Option D: Not high-cost: points and fees matter only above a 10% APR
The fee test does not require an APR above 10%.
Exam Tip
Apply the appropriate annual size tier, then test fees independently of APR.
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