High-cost mortgages under Regulation Z (Section 32), mandated by the Home Ownership and Equity Protection Act (HOEPA), are consumer loans secured by a principal dwelling that exceed specific, strict, thresholds for interest rates (APR), points and fees, or prepayment penalties. These loans trigger enhanced protections, including mandatory counseling and restrictions on terms like balloon payments and negative amortization.
High-cost mortgages include closed- and open-end consumer credit transactions secured by the consumer's principal dwelling with an annual percentage rate that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by the specified amount.
Regulation Z, 12 CFR part 1026, implements the Truth in Lending Act (TILA), 15 U.S.C. 1601 et seq., and includes a requirement that creditors establish an escrow account for certain higher-priced mortgage loans (HPMLs), and also provides for certain exemptions from this requirement.
Key takeaways. In most parts of the U.S., a jumbo loan is a mortgage exceeding $832,750 as of 2026, but the amount varies by county. Jumbo loans generally require a higher credit score, a higher level of income or assets and a larger down payment than non-jumbo loans.
HOEPA mainly covers high-cost mortgages, which are defined as loans with an annual percentage rate (APR) that exceeds the prime rate by a certain amount. HOEPA includes provisions such as assessing a borrower's ability to repay, restrictions on loan terms, and requirements for disclosures and pre-loan counseling.
In connection with an open-end, high-cost mortgage, a creditor shall not open a plan for a consumer where credit is or will be extended without regard to the consumer's repayment ability as of account opening, including the consumer's current and reasonably expected income, employment, assets other than the collateral, ...
2.4 How does this rule apply to HELOCs? The Bureau's HOEPA Rule extends HOEPA coverage to HELOCs. HELOCs will thus need to be analyzed under HOEPA's coverage tests, and any HELOCs that are high-cost mortgages will be subject to most of the same requirements and restrictions as closed-end, high-cost mortgages.
If a region's median home value exceeds 115% of the baseline mortgage loan limit, that area is designated as a high-cost area, and its local loan limits are adjusted upwards proportionally.
HPML/Section 35 Loan Definition
Regulation Z defines an HPML as a mortgage secured by a borrower's principal dwelling with an APR that is at least 1.5% higher (for a first lien) or at least 3.5% higher (for a second lien) than the average prime offer rate (APOR) for a comparable transaction as of the rate lock date.
The 3-7-3 Rule in mortgages isn't a loan type but a federal timeline from the TILA-RESPA Integrated Disclosure (TRID) rule, ensuring borrower protection by mandating disclosures within 3 business days of application, a 7-business-day wait between the initial Loan Estimate and closing, and another 3-day wait if significant changes (like APR) occur, giving borrowers time to review costs before committing to a loan.
12 CFR Part 1026 - Truth in Lending (Regulation Z)
High Value Mortgage (HVM)
The High Value Mortgage fixed interest rate with no Cashback may be available to you if you're borrowing €250,000 or more and using it to buy or build a property to live in as your home.
Seven common types of loans include Personal Loans, Auto Loans, Student Loans, Mortgage Loans, Home Equity Loans, Payday Loans, and Debt Consolidation Loans, each serving different financial needs, from major purchases like cars and homes to consolidating debt or managing unexpected expenses.
Section 1026.32(a)(1)(iii) provides that a closed-end credit transaction or an open-end credit plan is a high-cost mortgage if, under the terms of the loan contract or open-end credit agreement, a creditor can charge either a prepayment penalty more than 36 months after consummation or account opening, or total ...
The big difference is HPML is principal dwelling secured and HPCT is dwelling secured. In addition, there is an additional threshold for jumbo HPMLs. So, just because one applies won't always mean that both apply.
On the other hand, a high-cost mortgage has the following three major criteria in its definition: The APR exceeds the APOR by more than 6.5 percent. The total lender/broker points and fees exceed 5 percent of the total loan amount.
Certain types of loans are not subject to Regulation Z, including federal student loans, loans for business, commercial, agricultural, or organizational use, loans above a certain amount, loans for public utility services, and securities or commodities offered by the Securities and Exchange Commission.
With certain exceptions, Regulation Z requires creditors to make a reasonable, good faith determination of a consumer's ability to repay any residential mortgage loan, and loans that meet Regulation Z's requirements for ''qualified mortgages'' obtain certain protections from liability.
HECM Loan Limit Increasing to $1,249,125. The Federal Housing Administration announced that it will increase the maximum claim amount for Home Equity Conversion Mortgages in calendar year 2026 from $1,209,750 to $1,249,125 effective for case numbers assigned on or after January 1, 2026.
In general, a higher-priced mortgage loan has an annual percentage rate (APR) that's higher than a specified amount over a benchmark rate called the Average Prime Offer Rate.
28% rule. “The 28 percent rule is a traditional mortgage lending guideline stating that a homebuyer's monthly mortgage payment shouldn't exceed 28 percent of their gross monthly income.
The Home Ownership and Equity Protection Act (HOEPA)1 was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive lending practices for mortgages with high annual percentage rates (APRs) and/or high points and fees (known as high-cost mortgages) by restricting loan terms and features.