Our employees receive a preferred rate on their HELOC variable rate, as well as any subsequent fixed-rate portions.

For the initial account and for each fixed portion requested, a preferential rate addendum is signed disclosing the preferred rate and the increase rate at termination of employment.

My question is for the HELOC fixed portions, since the rate increases upon termination of employment, should these be treated as variable-rate under Reg Z?

Trying to determine if the preferred rate addendum is enough disclosure for fixed portions.

Thank you!

Sorry - a couple of questions:

What addendum for each fixed rate portion?? The fixed rate portion is part of the plan and should all be disclosed upfront in the initial disclosures. Why would there be an addendum??

What do you mean treated as variable-rate under Reg. Z. You mean in the initial HELOC disclosures??

The addendum is the preferred rate addendum describing the that the current rate on the fixed portion is a lower preferred rate and what the rate will be increased to after employment ends.

As far as Reg Z, I'm just wondering if this is treated as variable for disclosures. I was always told if it's fixed you can never increase the rate, but I'm wondering if our addendum covers us, or if we would need to treat these as variable rate (not fixed) loans for disclosure purposes.

Or we simply leave the rate alone and either do not offer the preferred rate on the fixed portion, or simply do not increase the rate at termination of employment.

I guess I would point you to comments 4 and 5 under Section 1026.40 — Requirements for Home-Equity Plans.

I guess you could disclose the fixed portion feature as normal in the initial disclosure and then use an addendum at the time of them exercising the fixed rate portion to address the employee discount.

Sure makes it messy and you probably need legal assistance to structure it correctly.