Under which conditions is a loan considered high-cost according to TILA?

A loan is classified as high-cost under the Truth in Lending Act (TILA) if the Annual Percentage Rate (APR) exceeds the Average Prime Offer Rate (APOR) by more than a specified threshold. Specifically, for first lien loans, if the APR is more than 3 percentage points above the APOR, the loan falls into the high-cost category. This designation is critical as it triggers additional requirements and regulations, aimed at protecting borrowers from potentially abusive lending practices.

The conditions associated with high-cost loans arise from TILA's efforts to enhance transparency and limit predatory lending. When lenders offer loans that are considered high-cost, they must comply with more stringent disclosure requirements and restrictions, which help ensure that borrowers are fully informed about the terms of their loans and the associated costs.

Regarding the other potential classifications, stipulations about points and fees exceeding a certain percentage of the loan amount or categorizing a loan as subprime don't necessarily designate a loan as high-cost under TILA. While these factors may indicate that a loan carries additional risks or may be subject to higher rates, they do not align directly with the specific criteria that define a high-cost loan under the regulation.