Ohio High Cost Home Loan Requirements
State of Ohio has amended provisions of the Ohio High Cost Home Loan Act (HCHL) to lower existing points and fees thresholds and amend provisions of the Ohio Interest Act. As a result of these changes, additional high cost screening will be required.
A new high cost screening process is being implemented for 1-4 unit owner-occupied refinance transactions when the subject property is located in Ohio. In addition, lenders are now required to provide a copy of the Automated Valuation Model (AVM’s) to the consumer if no appraisal was ordered.
Background
The state of Ohio has issued regulations restricting the APR and the amount of points and fees that can be charged on a loan. Thresholds under the previous Ohio law matched the thresholds under the federal Home Ownership and Equity Protection Act ("HOEPA"). Ohio has now lowered those thresholds. As a result of these changes additional high cost screening will be required.
WFHM policy is to not originate or purchase any loans that fall under the definition of a "high cost home loan."
Applicability
Transactions covered by the provision are those that meet all of the following criteria:
- Ohio properties Single Family 1-4 unit dwellings
- Primary, owner-occupied properties
- Refinance transactions
Purchase money transactions, reverse mortgages, non-owner occupied dwellings are excluded.
Threshold
The screening process is designed to ensure applicable loans do not exceed the Ohio thresholds which are:
- The APR exceeds the eight percent amount established under HOEPA; or
- The total points and fees payable by the consumer at or before closing cannot exceed:
- five percent if the total loan amount is greater or equal to $25,000.00
- eight percent if the total loan amount is less than $25,000.00
The risk associated with the new Ohio anti-predatory lending law is HIGH, as it carries significant reputation risk. Failure to comply with Ohio HCHL act could permit the consumer to rescind the transaction under the parameters permitted under HOEPA. Willful and knowing violations may result in criminal proceedings and/or penalties and fines.
Automated Value Model (AVM)
Provisions require that no person may knowingly compensate, instruct or induce a real estate appraiser licensee or certificate holder to corrupt or improperly influence the independent judgment of the appraiser about the value of the dwelling.
Additionally, bill provides the following:
No person may perform a real estate appraisal for a mortgage loan, if the person is not licensed or certified in Ohio.
AVM usage: if you use an AVM in lieu of an appraisal the following must be performed:
- Provides the consumer loan applicant a copy of any written market analysis, price opinion, or valuation report based on an AVM and
- Include a disclaimer on the consumer’s copy specifying that the valuation was obtained from the market analysis, price