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Question: We just read that the Fed increased the fees for high cost loan determination to $561 effective 1/1/08. That got us to thinking about what standards are applied to Texas. Are they different?
Answer: Yes...and no. First, chapter 343 of the Texas Finance Code applies the federal HOEPA interest rate and fee tests to determine whether a loan is high cost. However, unlike HOEPA, the high cost loan prohibited practices apply to "residential mortgages," a technical term meaning purchase money and original construction loans. The prohibited practices include balloon notes with a term less than 60 months, prepayment penalty (already prohibited for loans over 12%), making loans without consideration of borrower's ability to repay, negative amortization, and charging for a product or service not received.
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