WASHINGTON (5/18/12)--The Federal Reserve this week released new reference rates that lenders must use to determine if loans for certain applications received in June 2012 will be subject to the Home Ownership and Equity Protection Act (HOEPA) under the Annual Percentage Rate (APR) trigger test.
HOEPA addresses certain deceptive and unfair practices in home equity lending, according to the Federal Trade Commission. The trigger test determines which loans would be subject to additional disclosures under Section 32 of Regulation Z. Under the test, first-lien loans with an APR that exceeds the current U.S. Treasury rate for a given security by 8% or more and second-lien loans with an APR that exceeds the Treasury rate by at least 10% would be subject to Section 32 disclosures.
The reference rate chart, which is frequently updated, can be used by credit unions to find the applicable interest rate for many Treasury securities. CUNA staff said credit unions can use the yield in effect on the 15th of the month that precedes the month they received a given loan application to make their trigger test calculations.
For the chart, use the resource link.