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#1407245 - 06/23/10 05:57 PM Home improvment loan - short term financing
Tryin-2-Comply Offline
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Joined: Apr 2003
Posts: 202
Hills of TN
We are in the middle of a debate regarding fairly large home improvment loans and the new TIL rules. For example: customer applies for a $75000 home improvment loan. The LO wants to do a 6 month LOC to monitor the funds and the project. There is a 1st lien on the home (that we have) and they want to combine the two into the LOC - use the first draw to payoff the first lien. The loan will be secured by the borrower's principal dwelling. Because of the new high-cost rules, the APR exceeds the threshold for a first lien transaction and is now subject to verifying and documenting the consumer's repayment ability.

How are other banks handling these situations? reducing the rate to make the APR below the threshold. Not doing these any more? Documenting that the balloon will be repaid by another loan...help.

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#1407321 - 06/23/10 07:45 PM Re: Home improvment loan - short term financing Tryin-2-Comply
Still Smiling Offline
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Joined: Nov 2007
Posts: 767
I was thinking that open-end transactions were exempt from the HPML requirements---
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#1407329 - 06/23/10 07:57 PM Re: Home improvment loan - short term financing Still Smiling
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,844
Bloomington, IN
Although they are referring to this as a LOC it is not an open-end transaction. It's a closed-end draw note structured as a construction loan.

T2C, I think you could rely on this being a temporary loan and exempt under 226.35(a)(3).
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1407334 - 06/23/10 08:05 PM Re: Home improvment loan - short term financing Dan Persfull
Tryin-2-Comply Offline
100 Club
Joined: Apr 2003
Posts: 202
Hills of TN
Thanks, Dan. I do appreciate your response.

SS - not an open-end transaction.

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