Is it ok to deny a TX HE because the fees exceed the 3% fee cap?

If so, would this need to be in written policy?

IMO - No. but I'm sure there are extenuating circumstances in which a denial would be necessary such as exorbitant title work due to having to clean up the title from the time of purchase.

However I just don't think it's fair to the borrower to deny them simply because we can't or won't follow the law.

I'm going to disagree with ETX. You are not required to make a loan on which you'll lose money. You need a policy, that is reviewed and adjusted often, that sets a minimum dollar amount HELOC (or HEL) that you will make based on well-documented evidence that you can't make a profit on HELOCs for a lower principal amount. Not being able to charge all the fees necessary, then the loan is likely below the profit line.

Well maybe one should inquire as to why are the fees exceeding the cap in the first place?????

Hi! I attended a lending update class in April in San Antonio and the 3% fee cap was addressed. Of course you are not required to make loans at a loss. The 3% rate cap is justifiable to raise the loan amount threshold and should be documented IN YOUR POLICY because it could be a fair lending issue (disparate impact). That's why it's recommended to document the heck out of it and counter with it being a "business necessity". Also, in your policy, include a dollar limit amount of what the minimum amount of your home equity can be because of the costs. Keep documentation for proof.

FYI: FEE Limit includes all fees to originate, evaluate, maintain, record, insure, or service the loan.

DOES NOT INCLUDE:TITLE POLICY, PROPERTY INSURANCE, VOLUNTARY CREDIT INSURANCE, OR TAXES

Lil' Belle, you may want to review Texas Admin code 153.5(11) as it specifically includes title insurance (which is the title policy). I would agree that the remainder of your list is excluded, to include bona fide discount points and per diem interest.