What is the implication of a loan being considered as high-cost under Section 32?

A loan considered high-cost under Section 32 of the Home Ownership and Equity Protection Act (HOEPA) brings specific regulatory implications to protect consumers. One significant requirement is that lenders must ensure that borrowers receive mandatory counseling from a HUD-approved housing counselor before closing on the loan.

This counseling is designed to help borrowers fully understand the terms of the loan and the associated risks, particularly in high-cost situations where loans may have features that increase the likelihood of default or foreclosure. The aim is to ensure borrowers make informed decisions.

While higher interest rates and fees can be characteristics of high-cost loans, the definitive implication of Section 32 is the requirement for this counseling, serving as a protective measure for borrowers in potentially risky lending situations. Thus, the emphasis on mandatory HUD counseling underscores the goals of transparency and consumer education in the high-cost loan context.