Good afternoon, our question is around reporting number of months for an introductory rate for home equity lines of credit with adjustable rates. Our example is a home equity line of credit with a 15 month promo rate good only on the first draw if that draw is taken at closing. Any subsequent draw on the line could be a different rate. So if the customer closes a line and at closing does NOT take a draw they do not get the promo rate. But, if the customer decides to take a draw 10 days after closing they would get the rate at which the equity line is tied to, not the promo rate available at the time of the closing.
So if a customer takes the draw at the closing and it is the promo rate for 15 months, do we report the number of months until the first date the interest rate may changes as 15 or is the number of month reported as 1 month because the rate could change on any subsequent draw monthly or the first draw if it wasn’t taken at closing? Thank you for your input in advance
Paragraph 4(a)(26).
1. Types of introductory rates. Section 1003.4(a)(26) requires a financial institution to report the number of months, or proposed number of months in the case of an application, from closing or account opening until the first date the interest rate may change. For example, assume an open-end line of credit contains an introductory or “teaser†interest rate for two months after the date of account opening, after which the interest rate may adjust. In this example, the financial institution complies with § 1003.4(a)(26) by reporting the number of months as “2.â€