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#1959831 - 09/05/14 07:41 PM ROR - HELOC Increase
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Joined: Nov 2008
Posts: 1,060
In the mountains
We offer 10 year HELOCs. If a customer requests an increase during the 10-year term and is approved, the increase will be accomplished by a modification agreement that modifies both the Note that is already in place and the Deed of Trust to reflect an increase in the security. The modification agreement also states that the modification is also evidenced by a Renewal and/or Modification Note, which it is - a new Note disclosing the new terms is created and signed by the customer.

My question is this...Should we be using Rescission Model Form (When Opening an Account) or Rescission Model Form (When Increasing the Credit Limit)?
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#1959837 - 09/05/14 07:45 PM Re: ROR - HELOC Increase Likes to Comply
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
You have made two contradictory statements:

1. the increase will be accomplished by a modification agreement that modifies both the Note that is already in place and the Deed of Trust

2. the modification is also evidenced by a Renewal and/or Modification Note

You need to ask your legal counsel what is going on here. Is this a modification or a new plan.
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#1959860 - 09/05/14 08:21 PM Re: ROR - HELOC Increase Likes to Comply
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In the mountains
This is exactly what the modification agreement states. It is prepared by legal counsel. I would just treat it as a new plan, but I was under the impression that if a HELOC is refinanced before the maturity date it was not considered a new plan no matter how it was executed.
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#1959888 - 09/05/14 09:29 PM Re: ROR - HELOC Increase Likes to Comply
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,633
Galveston, TX
If it is new plan, the whole plan is subject to all new disclosures and the RofR. You need to ask the legal counsel that prepared this document what it is. It makes no sense to me why such wording is in a modification, of course I am not an attorney.
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#1959915 - 09/05/14 11:03 PM Re: ROR - HELOC Increase Likes to Comply
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
The bottom line question is:
Does the new agreement satisfy/replace/extinguish the old agreement? Does it stand on it's own. If so, it's a refinancing and requires new disclosures.

If it doesn't replace/satisfy/extinguish the old agreement and needs the old agreement to be legally binding, then it MAY qualify as a renewal/modification and not require new disclosures.

Let's get that answered and then we'll see if we can answer your original question.
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#1959979 - 09/08/14 02:54 PM Re: ROR - HELOC Increase Likes to Comply
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Joined: Nov 2008
Posts: 1,060
In the mountains
I'm going to seek the advice of my supervisor and she may forward on to legal counsel. I’ll let you know what they say.

But in the interim - If this would be in fact a refinancing, then wouldn't a refinanced HELOC at the end of the term but before the maturity date be considered a new plan by virtue of the new Note and therefore require a ROR notice? Then wouldn’t any refinancing of a HELOC during its term even if to increase the credit limit be considered a new plan and require a New Account ROR notice? So then the other types of ROR notices only apply for modifications…
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