Higher Priced Mortgage Loan lore

Higher-Priced mortgage loan (HPML)

A mortgage loan with an interest rate higher than a benchmark rate called the Average Prime Offer Rate (APOR).

Average Prime Offer Rate

The "Average Prime Offer Rate" (APOR) is an annual percentage rate that represents the average interest rate, fees, and other terms offered on mortgages to highly qualified borrowers, used as a benchmark to determine if a loan is considered a "higher-priced mortgage loan"

Example of HPML

A loan with an interest rate of 6.5% when the APOR is 5.5% would be considered an HPML.

HPML Threshold

For first-lien mortgages, the threshold is 1.5 percentage points above the APOR. For subordinate-lien mortgages, the threshold is 3.5 percentage points above the APOR.

HPML Protections

HPMLs are subject to additional rules, including ability-to-repay (ATR) requirements, restrictions on prepayment penalties, and mandatory escrow accounts for property taxes and insurance.

Second Appraisal Requirement

For HPMLs on properties being resold within 180 days at a higher price, a second appraisal may be required if the price increase exceeds certain thresholds. (20%)

For HPMLs on properties being resold within 90 days at a higher price, a second appraisal may be required if the price increase exceeds

10%

Lenders must provide borrowers with a copy of the appraisal at least

3 business days before closing.

Certain loans are exempt from HPML appraisal requirements, such as

qualified mortgages (QMs), loans for new manufactured homes, and loans under $25,000.