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#2179467 - 05/23/18 08:26 PM Collecting Interest on HELOC upfront
workerbee Offline
Member
Joined: Oct 2015
Posts: 61
Is there a regulation that can be provided to show that a lender cannot charge upfront interest on a heloc at closing? I understand the interest on a heloc is based on daily balance. However we are looking collecting interest at closing based on initial advance and the following statement would have any necessary adjustments.

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Lending Compliance
#2179570 - 05/24/18 02:35 PM Re: Collecting Interest on HELOC upfront workerbee
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
I've been dealing with HELOCs off and on since 1977 when Commercial Credit Corp introduced them into their product line. In all these years I have never heard of anyone contemplating collecting "prepaid interest" on a HELOC.

My first thought it would be a violation of your loan contract since accrued interest is generally calculated on the average daily balance at the end of the billing cycle. At the opening of the account you have no average daily balance to calculate accrued interest on for a billing cycle.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2179572 - 05/24/18 02:40 PM Re: Collecting Interest on HELOC upfront workerbee
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,618
Galveston, TX
I agree and believe that someone is terribly confused.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2179578 - 05/24/18 03:04 PM Re: Collecting Interest on HELOC upfront workerbee
workerbee Offline
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Joined: Oct 2015
Posts: 61
The contract does not state accrued interest. It states payment will consist of periodic finance charges.

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#2179579 - 05/24/18 03:19 PM Re: Collecting Interest on HELOC upfront workerbee
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,618
Galveston, TX
Get with your legal counsel.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2179642 - 05/24/18 05:24 PM Re: Collecting Interest on HELOC upfront workerbee
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,061
Toano, VA
My first thought was taxes. How would you keep track of an accurate amount of interest to report? If the interest-in-advance payments covered accruals in a future tax year, that could be a problem.
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