Question with Sample Answer—Real Estate Financing.

Jane Lane refinanced her mortgage with Central Equity, Inc. Central Equity split the transaction into two separate loan documents with separate Truth-in-Lending disclosure statements and settlement statements. Two years later, Lane tried to exercise her right to rescission under the Home Ownership and Equity Protection Act (HOEPA), but Central Equity refused.

Central Equity said that the loans were two separate loan transactions and because neither loan imposed sufficient fees and costs to trigger HOEPA, its protections did not apply. Lane claimed that the costs and fees combined into a single transaction

(which Lane expected the loan to be) would surpass the HOEPA threshold and trigger its protections. Because Central Equity did not provide the necessary disclosures under HOEPA, Lane argues that she can properly rescind under its provisions.

Is Lane correct? Does loan splitting allow the lender to count each loan transaction with a borrower separately for purposes of HOEPA? Why or why not? (See page 578.)

—For a sample answer to Question 22–2, go to Appendix G at the end of this text.