We have an executive Officer who would like a 1st mortgage HELOC for $108,000. He is paying off another HELOC and the argument is that this loan is a “refinance” of the first HELOC and is not subject to the $100,000 limit. I can agree that the loan is not subject to the $100,000 limit because it is a 1st lien but I can also see that it would be subject to the limit because it is open-end. It seems like I read somewhere that any HELOC would be subject to the $100,000 limit. Are HELOCs subject to the $100,000 limit? Does it matter if the loan is a 1st or 2nd lien? Thanks for the help

This is a snippet from 215.5. It does reference refinance; however gives stipulations. Also it must be a 1st lien.


(c) A member bank is authorized to extend credit to any executive officer of the bank:

(1) In any amount to finance the education of the executive officer's children;

(2) In any amount to finance or refinance the purchase, construction, maintenance, or improvement of a residence of the executive officer, provided:

(i) The extension of credit is secured by a first lien on the residence and the residence is owned (or expected to be owned after the extension of credit) by the executive officer; and

(ii) In the case of a refinancing, that only the amount thereof used to repay the original extension of credit, together with the closing costs of the refinancing, and any additional amount thereof used for any of the purposes enumerated in this paragraph (c)(2), are included within this category of credit;

https://www.fdic.gov/regulations/laws/rules/4000-7340.html

As far as the second question is concerned, a home equity loan secured by a first lien could be made in any amount pursuant to 12 C.F.R. § 215.5(c)(2) as long as a prior loan on the residence has not been made by the bank and the home equity loan is used for the purposes specified in that subsection, that is, the maintenance or improvement of the officer's residence. If the home equity loan is used for any other purpose, it is then subject to the limits imposed by 12 C.F.R. § 337.3(c).

How do you monitor the EO doesn't use any available credit for a purpose that is not covered, such as going on vacation or purchasing a lawn tractor?