What is the purpose of the Home Ownership and Equity Protection Act (HOEPA)?

The purpose of the Home Ownership and Equity Protection Act (HOEPA) is primarily to address abusive practices in refinances and certain high-cost home loans. HOEPA was enacted in response to concerns about predatory lending, particularly in the context of home equity loans and mortgage refinancing. It establishes requirements for disclosures, which aim to ensure that borrowers are fully informed of the terms and costs of the loans they are entering into, particularly when they involve high-interest rates or fees.

By focusing on abusive practices, HOEPA helps protect consumers from loans that may have hidden costs, excessive fees, or terms that could lead to foreclosure or significant financial distress. While ensuring equal credit opportunity, regulating loan costs, and providing consumer information are important aspects of consumer protection in the lending industry, they are encapsulated under different regulations and acts, such as the Equal Credit Opportunity Act (ECOA) and the Truth in Lending Act (TILA). HOEPA specifically targets the vulnerabilities related to high-cost loans to bolster consumer protection and promote more responsible lending practices.