Topic: Home Equity Line of Credit (HELOC)
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Under Illinois law, can we require home equity line of credit (HELOC) borrowers to use a non-affiliated title company? Does it make a difference if we are obtaining only a title search (as part of our due diligence), which we pay for ourselves, without requiring the borrower to purchase title insurance?
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Yes, we believe your bank may select third parties to perform title searches for HELOC applicants as part of its due diligence when the bank pays the search fees, with the provisos discussed below. Because your institution would be paying for the costs of the title searches, as opposed to the applicants, you have a…
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Can a HELOC branch lobby banner or outside rolling digital sign contain the phrase “prime minus xx.xx%,” “prime floating,” or “x year term” without triggering the additional disclosures under Regulation Z?
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Yes, you should provide additional disclosures on advertisements using the terms “Prime Floating,” “Prime Minus xx.xx%,” or “X Year Term.” Unlike Regulation X, Regulation Z does not provide exceptions or permit short-form advertising disclosures for banners or scrolling digital signs. Regulation Z’s rules for home-equity plans require additional disclosures when an advertisement uses a trigger…
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Under the mortgage loan originator compensation (MLO) rules, can we award commissions for a HELOC based on the initial draw amount, without taking into account any subsequent draws?
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Yes, you may award commissions for a HELOC based on the initial draw amount. Regulation Z’s MLO compensation rules do not apply to HELOCs, as they apply only to closed-end consumer credit transactions secured by a dwelling. For resources related to our guidance, please see: Regulation Z, 12 CFR 1026.36(b) (The MLO compensation rules in…
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Can we offer a HELOC on non-owner-occupied rental property? The loan purpose is to make repairs on the rental property, the borrower is an individual, and the loan amount is over $5,000.
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Yes, you may offer a HELOC on non-owner-occupied rental property. We are not aware of any law or regulation that would prevent it. The Illinois Financial Services Development Act, which applies to any revolving credit plan where the borrower is a natural person, expressly permits a financial institution to secure the loan with real property.…
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Are we required to back-date payments made on consumer open-end lines of credit products (HELOCs and overdraft protection lines) to the prior business day if they are made in our lobby on Saturdays or in our night drop box on the weekend?
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No, Regulation Z does not require you to backdate payments received on a non-business day, but you must either credit payments on the “date of receipt” — meaning the date on which the payment reaches your institution — or ensure that any delays in crediting payments do not result in a late charge or a…