legal
Higher-Priced Mortgage Loan
A consumer mortgage with an APR exceeding the average prime offer rate by a defined margin, triggering additional federal compliance requirements.
In depth
A Higher-Priced Mortgage Loan (HPML) is one whose APR exceeds the Average Prime Offer Rate (APOR) by 1.5 percentage points for a first-lien conforming loan, 2.5 points for a first-lien jumbo loan, or 3.5 points for a subordinate lien. HPMLs face mandatory escrow accounts for taxes and insurance, appraisal requirements, and ability-to-repay scrutiny. Misconception: HPML status is not the same as Section 32 high-cost status; HPML is a lighter-touch trigger that catches more loans. Practically, most seller-financed loans become HPMLs because their rates exceed the bank market. Sellers must establish escrow accounts for at least five years on first-lien HPMLs, a complexity that note servicers handle automatically. Always confirm current APOR thresholds before pricing a seller-financed consumer loan.
Educational content only. Definitions reflect typical usage in US owner-finance and FSBO transactions; statutes and case law vary by state. Consult a licensed real-estate attorney for fact-specific guidance.