Final answer:
The CFPB fee threshold that triggers HOEPA disclosures is when total loan fees exceed 5% of the loan amount for loans $21,980 or more, or the lesser of 8% of the total loan amount or $1,099 for smaller loans. These thresholds are adjusted annually and are meant to protect consumers from predatory lending.
Step-by-step explanation:
The fee threshold set by the Consumer Financial Protection Bureau (CFPB) that triggers the Home Ownership and Equity Protection Act (HOEPA) disclosures is determined by comparing total loan fees to a certain percentage of the loan amount. As of 2021, for most home loans, HOEPA disclosures are required if the total fees and points payable by the consumer at or before loan closing exceed 5% of the total loan amount for loans of $21,980 or more, or the lesser of 8% of the total loan amount or $1,099 for loans under $21,980.
These thresholds are adjusted annually based on the annual percentage change in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Disclosures must be provided to the borrower at least three business days before loan consummation. If a loan modification or extension meets these fee thresholds, it may also trigger HOEPA disclosures.
HOEPA was designed to provide protections against predatory lending practices, and lenders who fail to provide necessary disclosures may face penalties. HOEPA disclosures help borrowers understand the costs and risks associated with high-cost loans. It is crucial for lenders to stay updated with the current thresholds to ensure compliance with the CFPB regulations.