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#2072464 - 04/05/16 03:37 PM Unique HELOC plan disclosure
Laketime Offline
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Joined: Aug 2002
Posts: 554
I am never sure when changes/variations to HELOC "standard product" Plan Disclosures trigger unique HELOC Plan Disclosures.

We basically have one HELOC product. The Index (earning rate) is WSJP + a margin of 0%, thus the earning rate would be 3.50% with the current WSJP. However, the bank has a HELOC floor rate of 5%, thus that in the current earning rate on all outstanding HELOC balances. The current Standard Product HELOC Plan Disclosure provides a Minimum Payment Example in of 5% and the Historical Example (matrix/table in the HELOC Plan Disclosure) also provides an example of a 5%APR.

On very rare occasions a lender will approve a HELOC with a 4% floor. Using the same example from above, because WSJP is 3.50% and less than the minimum floor rate of 4%, the earning rate is 4%.

Does the bank need to change the HELOC to reflect the 4% rate (non-standard rate) in both the Minimum Payment and Historical Example (matrix/table) in the HELOC Program Disclosure or is it permissible to leave the 5% examples?

Any responses will be appreciated.

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Lending Compliance
#2072503 - 04/05/16 04:54 PM Re: Unique HELOC plan disclosure Laketime
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Different floor rates would constitute different plans and you would need a plan disclosure for each of those products.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2072697 - 04/06/16 05:55 PM Re: Unique HELOC plan disclosure Dan Persfull
Laketime Offline
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Joined: Aug 2002
Posts: 554
Thanks Dan! I agree.

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#2072698 - 04/06/16 05:58 PM Re: Unique HELOC plan disclosure Laketime
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
On very rare occasions a lender will approve a HELOC with a 4% floor.

Beware of fair lending issues. Doing things rarely without set policy and procedures is a recipe for disaster.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2073253 - 04/10/16 10:21 PM Re: Unique HELOC plan disclosure Laketime
jlroberts Offline
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jlroberts
Joined: Sep 2009
Posts: 1,601
Ohio
We are adding a new HELOC product that will have different terms based on the credit limit. The new product will have a draw period and a repayment period of 10/5, 10/10 or 10/15. Would this require three separate disclosures?

Another unique feature will be that at the end of the draw period, the repayment period will actually be determined by the balance on the account. So someone might have a 50K 10/15 when the line is established, however if the balance after 10 yrs is only 5K, the repayment period will only be 5 yrs. I'm hoping that all we have to do is spell out those terms in the disclosure and Note/Agreement.

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#2073267 - 04/11/16 12:52 PM Re: Unique HELOC plan disclosure Laketime
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
Different repayment phase constitute separate plans:

4. Disclosures for the repayment period. The creditor must provide disclosures about both the draw and repayment phases when giving the disclosures under §1026.6. Specifically, the creditor must make the disclosures in §1026.6(a)(3), state the corresponding annual percentage rate, and provide the variable-rate information required in §1026.6(a)(1)(ii) for the repayment phase. To the extent the corresponding annual percentage rate, the information in §1026.6(a)(1)(ii), and any other required disclosures are the same for the draw and repayment phase, the creditor need not repeat such information, as long as it is clear that the information applies to both phases.

Yes, you could explain how the different repayment phases are calculated at the end of the draw period.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2073472 - 04/11/16 08:40 PM Re: Unique HELOC plan disclosure Laketime
jlroberts Offline
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jlroberts
Joined: Sep 2009
Posts: 1,601
Ohio
As far as the historical example goes, would we list an example as if we had been offering this product all along? So instead of listing 15 years of interest only we would list 10 years of interest only and the first 5 years of a repayment?

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#2073505 - 04/11/16 10:14 PM Re: Unique HELOC plan disclosure Laketime
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
Yes.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2073516 - 04/12/16 02:44 AM Re: Unique HELOC plan disclosure Laketime
jlroberts Offline
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jlroberts
Joined: Sep 2009
Posts: 1,601
Ohio
Thanks rlc!

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