A loan of $20,000 or more meets the points and fees coverage test if the total points and fees exceed what percentage?

The correct answer is that a loan of $20,000 or more meets the points and fees coverage test if the total points and fees exceed 3% of the total loan amount. This benchmark is established by the Consumer Financial Protection Bureau (CFPB) to determine whether a loan is subject to certain provisions under the Truth in Lending Act (TILA).

When the points and fees exceed this threshold, it triggers additional compliance requirements designed to protect consumers from predatory practices associated with high-cost loans. The 3% threshold is a critical measure as it ensures that borrowers are not unduly burdened by excessive fees that can lead to unaffordable loan terms.

On the other hand, options suggesting percentages lower or higher than 3% are incorrect because they do not align with the regulations stipulated by the CFPB for this type of loan. Understanding this percentage is essential for compliance in mortgage lending and safeguarding borrowers' interests.