What is required for a High-Cost loan in addition to tax and insurance escrows?

For a High-Cost loan, federal law mandates several consumer protections to ensure borrowers are informed and can make sound financial decisions. One of those requirements is mandatory counseling for borrowers. This counseling aims to educate borrowers about their loan terms, the implications of high-cost loans, and alternatives that may be available to them. The inclusion of multiple appraisals serves as a safeguard against undervaluing the property, which can help ensure that borrowers are not taking out a loan that exceeds the fair market value of the home.

This dual requirement is necessary because high-cost loans often carry a higher risk of default, and the additional layers of scrutiny and education ensure that borrowers fully understand their obligations and the ramifications of their choices. These measures help protect consumers from entering into unfavorable loan agreements that they may not be able to afford or understand fully.

The other options do not accurately reflect the specific requirements for High-Cost loans; higher interest rates alone do not encompass the necessary protection measures imposed on these loans, nor do they pertain exclusively to fixed-rate mortgages or first-time homebuyer programs.