HOEPA High-Cost Mortgage Thresholds 2026: APR, Fees, Penalties
A loan that crosses any one of the HOEPA triggers is a high-cost mortgage under 12 CFR 1026.32, and it then carries extra disclosures, mandatory counseling and a list of banned terms. The test gives an APR and an APOR, or a fee total and a loan amount, and asks whether the loan is high-cost. HOEPA covers closed-end loans and HELOCs secured by the consumer's principal dwelling. Reverse mortgages, initial construction loans, loans where a Housing Finance Agency is the creditor and USDA Section 502 Direct loans are exempt (12 CFR 1026.32(a)(2)).
The three triggers
| Trigger | A loan is high-cost if | Source |
|---|---|---|
| APR, first lien | APR exceeds APOR by more than 6.5 percentage points | 12 CFR 1026.32(a)(1)(i)(A) |
| APR, first lien on a personal-property dwelling under $50,000 | APR exceeds APOR by more than 8.5 percentage points | 12 CFR 1026.32(a)(1)(i)(B) |
| APR, subordinate lien | APR exceeds APOR by more than 8.5 percentage points | 12 CFR 1026.32(a)(1)(i)(C) |
| Points and fees, loan amount $27,592 or more | Points and fees exceed 5% of the total loan amount | 12 CFR 1026.32(a)(1)(ii)(A) |
| Points and fees, loan amount under $27,592 | Points and fees exceed the lesser of 8% of the total loan amount or $1,380 | 12 CFR 1026.32(a)(1)(ii)(B) |
| Prepayment penalty | The creditor can charge a prepayment penalty more than 36 months after consummation, or penalties that can exceed 2% of the amount prepaid | 12 CFR 1026.32(a)(1)(iii) |
The $27,592 and $1,380 figures are re-set every January 1 by the change in the Consumer Price Index reported the previous June 1. The percentages and APR spreads do not change. Pick the threshold using the face amount of the note, then apply the percentage to the total loan amount, which can be lower (comment 32(a)(1)(ii)-3).
| Year | Loan amount threshold | Small-loan dollar trigger |
|---|---|---|
| 2024 | $26,092 | $1,305 |
| 2025 | $26,968 | $1,348 |
| 2026 | $27,592 | $1,380 |
What a high-cost mortgage may not include
- A balloon payment more than twice a regular payment, with narrow exceptions such as a bridge loan of 12 months or less (12 CFR 1026.32(d)(1)).
- Negative amortization, or more than two periodic payments paid in advance from the proceeds (12 CFR 1026.32(d)(2)-(3)).
- An interest rate increase after default (12 CFR 1026.32(d)(4)).
- Any prepayment penalty (12 CFR 1026.32(d)(6)).
- A demand feature that lets the creditor call the loan early, except for fraud, payment default or borrower action that harms the creditor's security (12 CFR 1026.32(d)(8)).
- Financed points and fees (12 CFR 1026.34(a)(10)).
- A late fee above 4% of the past-due payment, or one charged before the end of the 15-day period that starts on the due date (12 CFR 1026.34(a)(8)).
- Fees to modify, renew, extend or defer a payment (12 CFR 1026.34(a)(7)), or a creditor or mortgage broker recommending default on a debt the loan will refinance (12 CFR 1026.34(a)(6)).
Pre-loan counseling and the extra disclosure
The creditor may not make a high-cost mortgage until it receives written certification that the borrower received counseling from a HUD-approved counselor on whether the loan is advisable (12 CFR 1026.34(a)(5)). The counseling happens after the borrower receives the Loan Estimate (or the HELOC disclosures). The counselor may not be employed by or affiliated with the creditor, and the creditor may not steer the borrower to a particular counselor. The HOEPA disclosure itself, with its warning that the borrower could lose the home, must be given at least 3 business days before consummation (12 CFR 1026.31(c)(1); 1026.32(c)).
Worked example (2026 figures)
Loan A: first-lien refinance, note amount $180,000, total loan amount $176,000, points and fees $9,100. The note amount is at least $27,592, so use 5%. $9,100 / $176,000 = 5.17%, which exceeds 5%. High-cost, even though the APR of 9.10% is only 2.80 points over an APOR of 6.30%.
Loan B: closed-end second lien of $22,000 (total loan amount $22,000), points and fees $1,500. Below $27,592, so the trigger is the lesser of 8% x $22,000 = $1,760 or $1,380, which is $1,380. $1,500 exceeds $1,380: high-cost.
Exam trap
Exam takeaway
Practice the price tests with our Regulation Z practice questions and read the TILA and Regulation Z study note and the predatory lending note.
Frequently asked questions
What are the HOEPA thresholds for 2026?
A first-lien APR more than 6.5 points over APOR (8.5 for subordinate liens), or points and fees over 5% for loans of $27,592 or more, or over the lesser of 8% or $1,380 for smaller loans (12 CFR 1026.32(a)(1); effective January 1, 2026).
Do the HOEPA dollar thresholds change every year?
Yes. The CFPB adjusts them each January 1 for the change in the Consumer Price Index reported the previous June 1. For 2025 they were $26,968 and $1,348.
Is counseling required for a high-cost mortgage?
Yes. The creditor needs written certification that the borrower received counseling from a HUD-approved counselor before it makes the loan (12 CFR 1026.34(a)(5)).
Can a high-cost mortgage have a prepayment penalty?
No. Prepayment penalties, balloon payments (with narrow exceptions), negative amortization and financed points and fees are all banned (12 CFR 1026.32(d); 1026.34(a)(10)).
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