When is a loan considered high-cost if it is a first mortgage?

A loan is considered high-cost when the interest rate exceeds a certain percentage in relation to the Average Prime Offer Rate (APOR) for comparable loans. This classification is significant because it triggers additional disclosure and protections for borrowers under the Home Ownership and Equity Protection Act (HOEPA). The law aims to protect consumers from predatory lending practices that are often associated with high-cost loans, which can carry excessive fees and unfavorable terms.

Determining whether a loan is high-cost primarily revolves around comparing the loan's interest rate to standard market rates. If the rate is significantly higher, it can indicate potential risk to the borrower, prompting the need for more stringent regulation to prevent exploitation.

While factors like the lender being a bank, the presence of prepayment penalties, or the length of the loan term can influence the overall structure and cost of a mortgage, they do not themselves determine if a loan is classified as high-cost. The key criterion remains the relationship of the interest rate to prevailing market rates.