Topic: Home Equity Line of Credit (HELOC)
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Do we need to disclose initial HELOC fees that we pay and that are not charged to the borrower, such as flood determination fees?
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We do not believe that you are required to disclose any fees paid by the lender in a home equity line of credit (HELOC) disclosure. Regulation Z’s disclosure requirements for HELOCs (12 CFR 1026.40) require that you disclose fees “to open, use, or maintain the plan” that are imposed by the creditor or by third…
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We would like to place a radio ad for our HELOCs. We want to promote an introductory fixed rate, which will revert to a variable rate after the introductory period ends. How should this be disclosed in the ad? Do we need to make the FDIC and Equal Housing Lender disclosures?
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Regulation Z’s advertising requirements require certain disclosures about the fixed introductory rate to be included in your radio advertisement. However, other lengthier disclosures relating to the annual percentage rate (APR) do not have to be included in the radio advertisement, as explained below. We also address the “Member FDIC” and “Equal Housing Lender” disclosures below.…
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Can we continue to send home equity statements if the borrower has filed for bankruptcy under Chapter 13?
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We recommend that you review your home equity statements to determine whether they may be construed as attempting to collect on the outstanding debt. If they demand payment in any way, even if it is voluntary repayment, we recommend that you do not send the statements. We also strongly recommend that you seek the advice…
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When we provide a HELOC, our loan origination system spits out an “Illinois Loan Product Choice Disclosure.” The form refers to 205 ILCS 635/5-8 and states that the customer has “been provided with an offer to accept a home loan product both with and without a prepayment penalty provision. . . .” If we do not currently provide a HELOC option without a prepayment penalty, do we need to start doing so?
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No, we do not believe that you are required to provide borrowers with an alternative loan that does not have a prepayment penalty when offering a home equity line of credit (HELOC) with a prepayment penalty. Neither Illinois nor federal law requires a HELOC to be offered with a non-prepayment-penalty option. The Illinois law cited…
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We are changing how we charge cancellation fees on our HELOCs to avoid violating HOEPA. Is there anything in the rules that prohibits tiered prepayment penalties for HELOCs based on the line amount?
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We are not aware of any prohibitions of using a tiered prepayment penalty system based on the amount of the line of credit for a home equity line of credit (HELOC). As you noted, the CFPB’s new HOEPA rules qualify a loan as a “high-cost mortgage” if a prepayment penalty can be charged more than…
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Can we offer a home equity loan as a “fixed rate” line, even though the initial teaser rate on the loan will expire after six months?
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We think it would be prudent to classify the HELOC as a variable-rate plan. Classifying and advertising such a HELOC as a fixed-rate plan might raise UDAAP risks. The CFPB has the power to deem any practice as “unfair, deceptive, or abusive”, even if the practice does not violate any law or regulation. 12 USC…