Skip to content
BOL Conferences
Thread Options
#197936 - 06/08/04 02:44 PM Separate HELOC Program
Anonymous
Unregistered

Bank currently offers a "premier" HELOC with a teaser rate, followed by P+0, and no fees. Needless to say, the borrower (and property in question)have to meet certain underwriting guidelines in order to qualify. Generally speaking, the borrower must be an "A" credit.

However, the bank often receives applications from individuals who don't quite meet the "premier" HELOC underwriting guidelines, and therefore present a higher degree of risk. As a result, the bank wants to develop another HELOC program (and Program disclosure) to use in the case of counteroffers. The "back up" program would have no teaser rate, would be priced at Prime + Something and would require customer to pay most, if not all fees.

Is this okay? Does anyone see any problems with this concept?

Return to Top
Lending Compliance
#197937 - 06/08/04 03:09 PM Re: Separate HELOC Program
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
We offer a Prime and a Prime + HELOC product - both plan disclosures are included in a packet with the application and booklet.

The disclosures are required at the time an application is given, this is why we include both disclosures.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#197938 - 06/08/04 03:09 PM Re: Separate HELOC Program
Luper Offline
100 Club
Joined: Mar 2003
Posts: 105
Most banks have numerous HELOC programs.
_________________________
Opinions are my own and not necessarily those of my employer.

Return to Top
#197939 - 06/08/04 03:47 PM Re: Separate HELOC Program
Ted Dreyer Offline
Diamond Poster
Ted Dreyer
Joined: Apr 2001
Posts: 2,245
Watch for the regulations that will be coming out under section 311 of the FACT Act to see if this will require a risk-based pricing notice after December 1 of this year.

Return to Top
#197940 - 06/08/04 04:01 PM Re: Separate HELOC Program
Anonymous
Unregistered

Dan

I'm just curious...what separates your Prime HELOC from your Prime+ HELOC? For example, is it property type, creditworthiness, etc?

Return to Top
#197941 - 06/08/04 04:05 PM Re: Separate HELOC Program
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:

Dan

I'm just curious...what separates your Prime HELOC from your Prime+ HELOC? For example, is it property type, creditworthiness, etc?




Creditworthiness and LTV.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#197942 - 06/09/04 05:32 PM Re: Separate HELOC Program
Anonymous
Unregistered

This may seem elementary, but for purposes of understanding what constitutes a "separate" HELOC plan that would prompt a separate "early" or application HELOC disclosure, what criteria is considered in distinguishing one plan from another? Our risk-based tiered pricing has me thoroughly confused.

In my opinion, we basically have 2 plans - variable rate with 90% or less LTV and variable rate with 91-100% LTV. We only have one payment option. Other than LTV driven margins, there are really other differences. Our pricing is based on creditworthiness (A or B borrower) and the LTV. IN addition, we throw in a .25% rate deduction for auto-deduct payments.

Can we get by with providing only 2 HELOC plan disclosures at application? If we provided them for each possible combination we'd have 12 possible "plans." Not helpful at all to the customer.

At this point, we provide 8 different "early" HELOC disclosures - even this seems like major overkill and is really quite confusing to the customer. We've not included the autodeduct rate reduction (we don't increase the rate later if the customer drops the auto-deduct for any reason).

Since we have only variable rate plans, in my book we have 2 separate plans, based on LTV - up to 90% and 91-100%. At the time of application we don't know the customer's creditworthiness or whether they will opt for autodeduct.

Return to Top
#197943 - 06/09/04 09:14 PM Re: Separate HELOC Program
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
Your post looked lonely sitting out there, so I'll take a shot at it! Line up your programs and compare each one to the required information to be disclosed under 226.5b(d). Are they truly identical in each aspect? What about teaser rates? Draw and repay periods?

I'm used to seeing more than one payment option, but if you only have one that certainly narrows it down. If everything is truly the same, except for the margins, then I would say you have one, maybe two (using LTV) variable rate plans. If you are able to set your early disclosure up correctly, it will prompt the customer to ask about current index, margin and rates. I believe you are permitted to assume a margin for purposes of the historical example and disclosure of the minimum payment and how it is calculated.

Return to Top
#197944 - 06/09/04 09:16 PM Re: Separate HELOC Program
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
Quote:

Your post looked lonely sitting out there,



(in response to "Anonymous")

Return to Top

Moderator:  Andy_Z