HOEPA thresholds on ITIN pricing: when points and fees turn a loan into high-cost
HOEPA applies only to loans on your principal dwelling. ITIN loans with broker fees and discount points can cross the 5% points-and-fees trigger; a non-resident’s vacation home or rental never falls under HOEPA at all.
Three triggers, read against an ITIN quote
A loan becomes high-cost under 1026.32 if any one of three tests is met: an APR more than 6.5 percentage points above the Average Prime Offer Rate on a first lien (8.5 on a subordinate lien or a small first lien), points and fees above 5% of the total loan amount for loans of roughly $27,000 or more (a higher percentage applies below that, indexed yearly), or a prepayment penalty that lasts beyond 36 months or exceeds 2%. Most ITIN loans are priced two to three points above agency rates, so the APR test is usually not the problem. The 5% test is. A 2% origination fee, 1.5 points to buy down the rate and a 1.5% borrower-paid broker fee add to 5% before a single third-party charge is counted, and lender-paid broker compensation counts too. Ask the lender to show you the points-and-fees calculation, not just the Loan Estimate.
What a high-cost classification obliges
If the loan crosses a trigger, the lender must give you a separate high-cost disclosure at least three business days before closing, you must receive counseling from a HUD-approved counselor before signing, and the loan may not contain a balloon payment, negative amortization, a prepayment penalty, a due-on-demand clause or fees for a loan modification. Counseling is available in Spanish and many other languages through HUD’s counselor list, and the counselor may not be affiliated with the lender. Many lenders simply refuse to close high-cost loans, which is why an ITIN quote that flirts with the 5% line tends to get restructured at the last minute — sometimes by converting a borrower-paid fee into a higher rate, which moves the cost but does not remove it.
The coverage limit that excludes most foreign-national loans
HOEPA covers consumer credit secured by your principal dwelling. A non-resident financing a beach house he occupies three weeks a year has no principal dwelling in the US, so HOEPA does not apply regardless of price, and a rental financed on a business-purpose DSCR loan is doubly excluded. Those borrowers rely on negotiation and on state law instead: several states apply their own high-cost or predatory-lending statutes with lower thresholds, and a few reach second homes. Ask the title company which state statute, if any, was checked.
Reading your own numbers
Take the “Origination charges” in Section A of the Loan Estimate, add any discount points and any compensation the lender pays your broker, and divide by the loan amount. Above 4% you are within sight of the trigger; above 5% the lender either mis-classified the loan or is planning to restructure it. The compensation page explains which broker payments are counted, and the points guide explains when paying points is worth it at all.
What to check
- On an ITIN loan, add origination fees, discount points and broker compensation and compare with 5% of the loan amount; that is the trigger most likely to bite.
- A prepayment penalty longer than 36 months or above 2% is itself a high-cost trigger, on top of being barred on non-QM owner-occupied loans.
- If the loan is high-cost you are owed a separate three-day disclosure and pre-closing counseling; do not let either be waived.
- Second homes and rentals are outside HOEPA; check whether your state’s high-cost law reaches them.
Frequently asked questions
My ITIN loan has 4.5% in lender and broker fees. Is it a high-cost mortgage?
Not on that number alone — the points-and-fees trigger is 5% of the total loan amount for loans above roughly $27,000. But the calculation includes items you may not have added, such as lender-paid broker compensation, certain prepaid finance charges and credit-insurance premiums, so ask for the lender’s worksheet. If it crosses 5%, the loan must carry HOEPA disclosures and counseling, or be restructured.
Does HOEPA protect a foreign buyer on a vacation condo?
No. HOEPA applies only to loans secured by the borrower’s principal dwelling, and a vacation property is not one. The loan may still be covered by Regulation Z generally and by the ability-to-repay rule if it is consumer-purpose, and some state high-cost statutes reach second homes. For pricing you are essentially negotiating as a business customer; compare at least three lenders.
The rule in full: HOEPA and high-cost mortgage rules. The borrower profile: Foreign nationals and ITIN borrowers. Related guides: Conventional loan requirements: credit, down payment, DTI, reserves, property · FHA vs conventional for a first-time buyer: which loan wins, and when · HUD-approved housing counselors: free help that servicers take seriously · Foreclosure rescue scams: the six patterns and the federal rule that bans upfront fees.
Other federal rules for foreign nationals and itin borrowers
TILA / Reg Z · RESPA · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HPA / PMI · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation
HOEPA for other borrowers
First-time buyers · Conventional borrowers · Veterans · Self-employed · Investors · Retirees · Bad credit · Physicians · Heroes · Rural buyers · Condo & second home · Refinancing