This is BWest.....once again I am locked out and cannot get on under my username. Doesn't surprise me on a day I have devoted to working on HELOC disclosures!

I need help: Reg Z 226.5b (d)(12)(xi) tells how the historical example must be done......"illustrating how annual percentage rates and payments would have been affected by index value changes implemented according to the terms of the plan" OK, do I understand correctly that the margin must be the margin that MATCHES the particular HELOC the lender is doing at any point in time and there must be a separate program disclosure for each different margin (example, even with prime or prime plus 1/2%,or prime plus 1%)??

Reason I need to know is that I have new disclosures almost done and I realize that the usual margin of 2% or 2.25% over prime is no longer being done........now it is even with prime, or 1.2% over prime or 1% over prime! Must this match or can a statement be added that says "this is the most recent margin and yours may be different"?????

That's the approach we've taken. The practical effect is that with a different margin, your historical example may reflect hitting your floor or ceiling at different times.

So, Bart, this means the disclosure must be changed not only annually but anytime lending decides to "tweek" the product by giving a customer a different margin?

Available margins reflect different products in our shop. We can accomodate prime, prime plus 1/2, prime plus 1, prime plus 2, prime plus 3. They're also contemplating interest-only. The historical example disclosure software we use makes it fairly easy to make a change, but we generally don't allow lender pricing flexibility on our equity lines.

FED-REGS, BANK-COMPLIANCE , 12 CFR §226.5b Requirements for Home Equity Plans.
3. Selection of margin. A value for the margin must be assumed in order to prepare the example. A creditor must select a representative margin that it has used with the index during the six months preceding preparation of the disclosures and state that the margin is one that it has used recently. The margin selected may be used until the creditor annually updates the disclosure form to reflect the most recent 15 years of index values.

We offer a HELOC at Prime and Prime + 1.

We have HELOC packets that include the application, the HELOC booklet and disclosures for both HELOC products. This way we are assured that the proper disclosure is given. We recently went through a FDIC audit and they liked the idea of having the packets. (When you do your annual updates, you have to make sure that the old disclosures in the packets are replaced with the new ones.)

We also do not allow our lenders to deviate from the disclosures. In my opinion, if a lender does change the margin on you, he has created a new HELOC product and it does require a new disclosure.

I asked a similar question a couple months ago. The general response I received was that you would need an historical example for each product with a different margin. Al Miller directed me to his bank's website (http://www.fremontbank.com/) for an example of a combination disclosure. It was very helpful.

SG- Thanks for the kind words. Yes, you can print our disclosure by starting the application process. You do have to claim the property is in our area, and the disclosure will "pop-up" before you have to provide any personal identifiable information. The disclosure is not copyrighted, and the tables come from the spreadsheets posted in the "Tools" section.

dpersfull- I disagree that you cannot deviate. If you negotiate a Prime + ½% rate (between your low and high rates), no new plan disclosure is needed. Also, if you decided to offer Prime - ¼%, the customer benefits, so you are OK.

As the disclosure says, "All of the terms described below are subject to change." And, "If any of the terms described below changes ... and you decide, as a result, not to enter into an agreement ..."

Al, I was taught that on a HELOC you could not deviate from your stated “plan”, and if you offered a different margin you have “created’ another “plan” which requires you to generate a disclosure for that product.

I can see where we may be ok if we lower the margin, because as you said it is a benefit to the customer, but what if we wanted to negotiate a higher margin?

I have a lot of faith in what you and Andy Z. posts, so I would appreciate your comments on this.

Thanks, Dan

This was from outside counsel. He even said that if we dislosed prime + 4% and negotiated prime + 5% for a particular borrower, he could defend it. The discussion was on an exception basis, not to go above the highest rate disclosed across the board. But, I don't see Reg Z requiring a new disclosure if you lower your rate. However, Marketing will want it re-printed "yesterday".

Thanks for your comments.

I appreciate everyone's help here. I have taken an Excel class and slaved long and hard on doing the spreadsheets needed to do the disclosures. They are checked and I am ready to "plug" in the information.

I think I may ask our regulator to take a look at them since they were so outspoken about the incorrect ones. Also, I may ask that they give an opinion on the question I asked here since I seem to have two different answers. That is, if I have understood everyone correctly.

Thanks!