In 2026, a covered closed-end, fixed-rate $300,000 conforming first mortgage on a principal dwelling has APR 3.1 percentage points above comparable APOR on the last date the rate was set before consummation. Regulatory points and fees are 2% of the regulatory total loan amount, and there is no prepayment penalty. Which classification follows?
Correct Answer
B) Higher-priced, but not high-cost under HOEPA
B. It is higher-priced, but not HOEPA high-cost on these facts. The 3.1-point spread meets the 1.5-point conforming first-lien HPML threshold, but not the applicable HOEPA APR trigger above 6.5 points. The 2% points-and-fees figure is below the applicable 5% trigger. No prepayment-penalty trigger exists. Scope and exceptions: Regulatory points and fees are not necessarily all closing costs. HOEPA has independent APR, fee and penalty triggers. HPML classification still requires separate analysis of exemptions from particular escrow or appraisal requirements. Source: Section 1026.32(a)(1)–(3) — https://www.consumerfinance.gov/rules-policy/regulations/1026/32/ Section 1026.35(a)(1)(i) — https://www.consumerfinance.gov/rules-policy/regulations/1026/35/
Why This Is the Correct Answer
B. It is higher-priced, but not HOEPA high-cost on these facts. The 3.1-point spread meets the 1.5-point conforming first-lien HPML threshold, but not the applicable HOEPA APR trigger above 6.5 points. The 2% points-and-fees figure is below the applicable 5% trigger. No prepayment-penalty trigger exists. Scope and exceptions: Regulatory points and fees are not necessarily all closing costs. HOEPA has independent APR, fee and penalty triggers. HPML classification still requires separate analysis of exemptions from particular escrow or appraisal requirements.
Why the Other Options Are Wrong
Option A: High-cost, but not higher-priced
It reverses the two results.
Option C: Both higher-priced and high-cost solely because the spread exceeds 3 points
Three percentage points is not a universal HOEPA trigger.
Option D: Neither, because every first-lien loan requires a 3.5-point spread
The 3.5-point HPML threshold concerns subordinate liens.
Exam Tip
Test each classification independently; higher-priced does not automatically mean high-cost.
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