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January 6, 2015
Business Accounts Documentation and Procedures with Beneficial Ownership
Deborah Crawford

January 6, 2015
FFIEC Cybersecurity Initiatives and Observations from the 2014 Assessments
Susan Orr

January 15, 2015
The ABC's of IRAs - The Basic Ingredients
Patrice Konarik

January 20, 2015
B & Z Appraisal Rules - Getting Them Right
Jack Holzknecht

January 21, 2015
HMDA Soup to Nuts
David Dickinson

January 22, 2015
Navigating the Treacherous Waters of IRA Rollovers, Transfers and Beneficiary Payouts
Patrice Konarik

January 28, 2015
Mortgage Life Cycle
Part I
David Dickinson and Jerod Moyer



Topic Options
#1646906 - 01/05/12 04:15 PM Reg B disclosure on HELOC suspensions
odimel2 Offline
100 Club

Registered: 09/23/08
Posts: 136
Loc: Las Vegas, NV
If a bank is going through their pipeline and reducing or freezing the lines based on drastic appraisal value changes determined by AVMs, is this considered adverse action and are the notices required?

Also, is the bank required to provide the customer with the copies of the AVM if the customer did not initiate the changes?

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Lending Compliance
#1646940 - 01/05/12 04:34 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 41156
Loc: Bloomington, IN
First question - yes.

Second question - no.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1646953 - 01/05/12 04:54 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
odimel2 Offline
100 Club

Registered: 09/23/08
Posts: 136
Loc: Las Vegas, NV
Dan, I read the definition of Adverse Action and I guess I am unclear as to where it reflects the notice requirement under this circumstance.
This is not a request from the borrower and

202.2(c)(ii) reflects : "A termination of an account or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor's accounts."

202.2(c)(2)(i) the term does not include : "A change in the terms of an account expressly agreed to by an applicant."
The banks disclosure statements states under Suspension or Reduction, bank can do so if the value of the property declines significantly below the appraised value.

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#1647076 - 01/06/12 08:24 AM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 41156
Loc: Bloomington, IN
You are reducing and/or freezing the lines based on the borrower's individual circumstance. You are not terminating or making a change to the product line based on a specified criteria, such as no activity for the past 6 months, therefore you are taking adverse action on an individual basis.

You also need to review 226.5b and its Commentary for notification requirements under Reg. Z.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1647518 - 01/06/12 02:52 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
odimel2 Offline
100 Club

Registered: 09/23/08
Posts: 136
Loc: Las Vegas, NV
Thank you very much Dan..

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#1647667 - 01/06/12 04:26 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Need Help Offline
100 Club

Registered: 01/17/07
Posts: 141
Loc: Las Vegas, NV
I'm a little confused. If the customer has agreed via the contract that the line can be restricted or decreased based on decreased value of collateral, does the bank need to do more than what is required by section 226.9(c)(1)(iii) of Reg Z - provide notice no later than 3 business days after action is taken and provide specific reasons for the action (and include info on consumer request for reinstatement, if applicable)? Is there something more than needs to be done?

Thanks.

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#1647708 - 01/06/12 05:12 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 41156
Loc: Bloomington, IN
If you freeze, reduce or terminate the HELOC you are taking adverse action. When adverse action is taken you must follow the notification requirements of Reg. B, FCRA and in the case of taking adverse action based on the terms of a HELOC you are referring to you must also incorporate the notification requirements of Reg. Z.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1647715 - 01/06/12 05:21 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Dan Persfull Offline
10K Club

Registered: 08/28/02
Posts: 41156
Loc: Bloomington, IN
As a reference point here's a sample letter suspending the LOC for the ability to pay. If you copy and paste please note the FDIC KC address is not the current one.

You can modify the letter as needed to insert your specific reasons.


This is to inform you that effective immediately all credit advance privileges for your Home Equity Line of Credit have been suspended.

This suspension is based on a routine evaluation of your outstanding credit with The Peoples State Bank and your ability to service your total debt. Based on our current account review and information obtained in your credit report we have a reasonable belief that you are unable to meet your debt repayment requirements.

For your reference this suspension is being imposed under the provisions of the Home Equity Line of Credit Consumer Open-End Agreement executed by you on September 2, 2004. More specifically Section 12 Subpart B of the agreement.

In order to reinstate your credit privileges under the original terms of the agreement you must send us a written request to that effect. Your credit privileges will only be reinstated if we determine that the condition which caused us to prohibit additional extensions of credit no longer exists and that none of the other provisions for suspension under Section 12 exists. If appraisal or credit report fees are incurred in making the determination, we may (if allowed by applicable law) charge you such fees.

Sincerely,







Attachment: Fair Credit Reporting Act Disclosure
Equal Credit Opportunity Act Disclosure


DISCLOSURE OF USE OF INFORMATION OBTAINED FORM AN OUTSIDE SOURCE

Our credit decision was based in whole or in part on information obtained in a report from the consumer reporting agency listed below. You have a right under the Fair Credit Reporting Act to know the information contained in your file at the consumer reporting agency. The reporting agency played no part in our decision and is unable to supply specific reasons why we have denied credit to you. You also have a right to a free copy of your report from the reporting agency, if you request it no later than 60 days after you receive this notice. In addition, if you find that any information contained in the report you receive is inaccurate or incomplete, you have the right to dispute the matter with the reporting agency.

CREDSTAR
6350 Laurel Canyon Blvd, 4th Floor
North Hollywood, CA 91606
Toll Free Number (800) 767-8569


EQUAL CREDIT OPPORTUNITY ACT NOTICE

The federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age (provided the applicant has the capacity to enter into a binding contract); because all or part of the applicant's income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. The federal agency that administers compliance with this law concerning this creditor is:

FDIC Consumer Response Center
2345 Grand Boulevard, Suite 100
Kansas City, MO 64108
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1647799 - 01/07/12 06:52 PM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
gd779 Offline
Junior Member

Registered: 01/04/11
Posts: 40
This seems odd. If an event of default occurs under the note (say, the borrower stops paying), you normally wouldn't need to give any kind of adverse action notice before freezing the line, I wouldn't think. And most loan agreements I've seen include a significant reduction in the value of the collateral as an event of default. 226.5b provides that the creditor may terminate and accelerate the loan if "any action or inaction by the consumer adversely affects the creditor's security for the plan, or any right of the creditor in such security." Is the difference here that we're talking about freezing the line but not accelerating it and starting collection?
_________________________
Disclaimer: This message is not legal advice and may not represent the views of the institution that I work for.

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#1647800 - 01/07/12 07:03 PM Re: Reg B disclosure on HELOC suspensions [Re: gd779]
Kathleen B Online

10K Club

Registered: 12/27/00
Posts: 17857
A termination of an account is adverse action

"(ii) A termination of an account or an unfavorable change in the terms of an account that does not affect all or substantially all of a class of the creditor's accounts"

The bank would give the customer a notice that the line was being terminated and payment accelerated; how else would the customer know the line was terminated?

The reference in the home equity disclosure is just telling you what must be in the upfront disclosure, not giving an exemption from adverse action notices.


Edited by Kathleen B (01/07/12 08:55 PM)
_________________________
Kathleen Blanchard CRCM "Kaybee"
Lending/CRA/HMDA/Mapping/Consulting
www.kaybeescomplianceinsights.com

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#1647807 - 01/08/12 06:54 AM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
rlcarey Offline
10K Club

Registered: 07/16/01
Posts: 51223
Loc: Galveston, TX
Let's break these out a little:

"This seems odd. If an event of default occurs under the note (say, the borrower stops paying), you normally wouldn't need to give any kind of adverse action notice before freezing the line, I wouldn't think."

That is a true statement. This would normally not be adverse action per 202.2(c)(2)

The term (adverse action)does not include:

(ii) Any action or forbearance relating to an account taken in connection with inactivity, default, or delinquency as to that account;

"And most loan agreements I've seen include a significant reduction in the value of the collateral as an event of default. "

While many loan agreements might contain such a clause, such a clause is not allowed in a HELOC contract. The only option available to a creditor if a significant decline in collateral value occurs (as defined in the regulation) is to freeze the line. The HELOC would not be in default.

"226.5b provides that the creditor may terminate and accelerate the loan if "any action or inaction by the consumer adversely affects the creditor's security for the plan, or any right of the creditor in such security."

A decline in collateral value does not impair the creditor's right to the collateral. The creditor's lien priority is not in jeopardy. See the examples of impairment given in the commentary at Paragraph 5b(f)(2)(iii).
_________________________
The opinions expressed are my own, take them or leave them.

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#1647808 - 01/08/12 07:46 AM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Kathleen B Online

10K Club

Registered: 12/27/00
Posts: 17857
However, the point I inelegantly was trying to make is that when a bank does terminate a line they do send a notice of default to the borrower - so it may not be a traditional adverse action notice but the borrower has to receive a demand notice or they will have no idea what is happening. Therefore there is no need for what we normally think of as an adverse action notice.
_________________________
Kathleen Blanchard CRCM "Kaybee"
Lending/CRA/HMDA/Mapping/Consulting
www.kaybeescomplianceinsights.com

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#1702378 - 05/23/12 10:30 AM Re: Reg B disclosure on HELOC suspensions [Re: odimel2]
Chuck Finley Offline
Member

Registered: 06/21/10
Posts: 68
Sorry to bring this topic back up, but I want to be clear. If we are terminating a HELOC due to foreclosure on the mortgage we would only have to send the Reg Z notice correct? Do we really have to put reinstatement language in there?

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