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High-cost mortgage loans regulated by the Home Ownership and Equity Protection Act (HOEPA) are characterized by specific criteria related to the loan's annual percentage rate (APR) and the fees associated with it. The correct choice identifies these loans as those which meet established APR thresholds defined under HOEPA. When a mortgage loan’s APR exceeds a certain margin above the average prime offer rate, or if the total points and fees exceed a designated percentage of the loan amount, it is considered high-cost.

The definition of high-cost mortgages is crucial because these loans are subject to additional protections to safeguard borrowers from abusive lending practices. HOEPA intends to ensure transparency and fairness in areas susceptible to predatory lending.

In contrast, different options fail to fit the high-cost mortgage definition provided under HOEPA. Loans with low points and fees would not reach the thresholds necessary to categorize them as high-cost. Home improvement loans can vary widely and are not inherently classified as high-cost unless they meet specific APR or fee criteria. Conventional mortgages generally do not qualify as high-cost loans unless they exceed established thresholds, making them subject to standard underwriting guidelines, rather than the specific regulations of HOEPA.