What is the regulation associated with high-cost loans?

The regulation associated with high-cost loans is outlined in Section 1026.32 of the Truth in Lending Act (TILA), which is part of Regulation Z. This section specifically defines what constitutes a high-cost mortgage under certain conditions, including interest rates, points, and fees.

High-cost loans are designed to provide additional protections to borrowers who are considered to be at greater risk of default and potential foreclosure. The regulation establishes specific requirements that lenders must follow when originating, servicing, or collecting on these loans. This includes providing borrowers with additional disclosures, restrictions on prepayment penalties, and limitations on the fees that can be charged.

By focusing on protecting consumers from predatory lending practices, Section 1026.32 aims to increase transparency in the mortgage lending process and ensure that borrowers are fully aware of the terms and costs associated with high-cost loans. This understanding is crucial for prospective mortgage loan originators as they navigate the regulatory landscape and ensure compliance in their practices.