How is a high-cost mortgage defined in relation to the average prime offer rate (APOR)?

The definition of a high-cost mortgage in relation to the average prime offer rate (APOR) is based on how much the Annual Percentage Rate (APR) exceeds the APOR. Specifically, a first lien loan is classified as a high-cost mortgage when the APR exceeds the APOR by 6.5% or more. This threshold helps identify loans that may impose excessive rates and fees compared to mainstream lending standards, thus offering consumer protections against predatory lending practices.

This definition stems from regulations designed to ensure that borrowers are aware of the costs associated with high-cost mortgages and can make informed decisions. These regulations aim to protect consumers from the risks of taking on loans that may be unaffordable or carry excessive terms. By establishing a clear percentage (6.5% in this case) above the APOR as the cutoff, it provides a measurable standard for both lenders and borrowers.

The other options do not align with the established criteria for defining high-cost mortgages, either presenting incorrect thresholds or failing to accurately describe the relationship between the APR and APOR in this context.