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?