The Home Ownership and Equity Protection Act (HOEPA) is a federal law that protects home equity borrowers against abusive lending. HOEPA covers "high cost" loans – that is, loans with an annual percentage rate (APR) of more that 10 percent above the Treasury rate or with point and fees that total more than 8 percent of the loan amount.
A credit counselor or lawyer can tell you if a loan you're considering is "high cost."
If a loan is covered by HOEPA, the lender can't:
- Charge you a penalty for paying off the loan early after the first five years of the loan term.
- Refinance your loan with the first five years of the loan term unless refinancing gives you a better deal than your original loan.
- Give you a loan that includes a balloon payment within the first five years of the loan.
- Give you a loan with monthly payments that don't cover the loan's interest and principal.
Discrimination in lending is against the law
It's against the law for lenders to consider your race, color, sex, national origin or religion when deciding whether to lend to you or what kind of loan you should get. Federal fair lending laws, including the Fair Housing Act and the Equal Credit Opportunity Act, forbid discrimination in lending. Many states also have laws that prohibit discrimination in lending.
If you think a lender is discriminating against you, contact your state consumer protection office or get advice from a credit counselor right away.
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