Which threshold CANNOT be used to identify high-cost loans according to federal law?

Which threshold CANNOT be used to identify high-cost loans according to federal law?

• A. Interest-rate threshold
• B. Loan-to-value threshold
• C. PMI threshold
• D. Debt-to-income threshold

Answer: (C)

High-cost loan status under federal law is determined by two HOEPA triggers: the APR threshold and the points-and-fees threshold. The APR threshold looks at whether the loan’s interest rate is significantly higher than the market (APOR) for a comparable loan, and the points-and-fees threshold checks whether the closing costs paid by the borrower (points and fees) exceed 5% of the loan amount. Other factors like loan-to-value, debt-to-income, or private mortgage insurance are not used as HOEPA triggers. PMI is an ongoing cost, not a closing-cost trigger, so it cannot be used to identify a high-cost loan.

High-cost loan status under federal law is determined by two HOEPA triggers: the APR threshold and the points-and-fees threshold. The APR threshold looks at whether the loan’s interest rate is significantly higher than the market (APOR) for a comparable loan, and the points-and-fees threshold checks whether the closing costs paid by the borrower (points and fees) exceed 5% of the loan amount. Other factors like loan-to-value, debt-to-income, or private mortgage insurance are not used as HOEPA triggers. PMI is an ongoing cost, not a closing-cost trigger, so it cannot be used to identify a high-cost loan.