HELOC's are new for us. In the early disclosure, do you take the current rate/APR and then treat it like it is fixed for the ten year min/max examples? Seems odd (misleading) when our HELOC is not fixed but is tied to Prime.

From the OSC to 226.5b(d)(12)(xi)(8)

. . . A creditor need show only a single payment per year in the example, even though payments may vary during a year. . . . .

Also for HELOCs the historical example must reflect 15 years of the index. If your term is only 10 years then your payments will be calculated for ten years, but you still have to show 15 years of history for the index (assuming the index has a 15 year history).

Each year must reflect the payment based on that year's index plus margin.

Sage, are you referring to the example required by 226.5b(5)(iii)? If so, you're correct, you use a recent APR (per footnote 10c: "the most recent rate provided in the historical example described in paragraph (d)(12)(xi) of this section or a rate that has been in effect under the plan since the date of the most recent rate in the table.")

I don't see it as misleading, since you also show (under 226.5b(x)) the minimum payment that would be in effect at the maximum possible APR.

I was referring to 226.5b(d)(5)(iii) the minimum payment example. It seems confusing to use only one rate (the last one in the historical example) when we know our rate will vary throughout the term of the HELOC.

I'm tagging on to this as I have a "somewhat similar" question but mine is dealing with a fixed-rate HELOC plan disclosure. Our plan disclosure includes the minimum periodic payment example as follows:

"Minimum Payment Example: If you made only the minimum monthly payment and took no other credit advances, it would take 7 years and 10 months to pay off a credit advance of $10,000 at an ANNUAL PERCENTAGE RATE of 9.5%. During that period, you would make 60 payment(s) varying between $279.17 and $100.00 followed by 33 payments of $100.00, with a final payment of $10.72. 9.5% is an example of an ANNUAL PERCENTAGE RATE we have offered recently. The annual percentage rate includes only interest and not other costs."

My questions:
1) Since this is not variable there is no historical table to get a "recent rate". What should be considered "recent"? 12 months ago?
2) the verbiage describing the payment states "60 payment(s) varying between". Since this is fixed is it alright to state "varying" or should this be a "fixed" payment?

Thank you for your help.

1. Look to footnote 10c in 226.5b(d)(6).

2. This will depend on how your payment is calculated. If it's accrued interest plus a percentage your payment could be between X and X. If it's amortized then it would be a single payment.

Thanks Dan. I was reading through the OSC and forgot to go back and look at the regulation and missed the footnote. That was what I needed.