For some reason (determined before my time here) we are disclosing three (3) historical tables in our HELOC disclosures. We have one at 1.5%, 2.0% and 2.5% margins. From reading the Reg and Commentary, it appears we only need to do one example, not three. Am I missing something?

Do you offer tiered rates, 3 separate HELOC products or use different indices?

We just recently have gone to providing just one product disclosure based on our most common product. At least "verbally" our regulator (FRB) has indiated that this is acceptable.

If you are just referring to the use of different margins, you can use a representative sample in your disclosure.

According to the commentary 226.5b(d)(12)(xi):

3. Selection of margin. A value for the margin must be assumed in order to prepare the example. A creditor may 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.

Additonally, 226.5b(d)(12)(v) instructs the consumer to:

"ask about the current index value, margin, discount or premium, and annual percentage rate. "

Varying other terms may constitute separate programs, but having different margins does not.

I agree if the programs are the same other than the margin.

In our case we have a Prime HELOC with a floor of 6% and Prime Plus HELOC with a floor of 7%. We have 2 separate disclosures because the floors differ.

I am still verifying this one...if everything in the HELOC is the same - same floor, same index - except for the margin, then I only need ONE example table, correct. The example table should show a margin that has been offered within the last six months. The only difference in any HELOC is that it is always PRIME + margin (margin based on LTV). Does it sound like I would need more than one historical table in my disclosure?

No - one table should do it under those circumstances.

Not in my opinion. I don't think you have 3 plans. You have one plan and the margin varies based on the LTV.

jwr1996- I would use 2 tables. The marketing folks want the lowest margin to make the product look as good as possible. Counsel wants the highest margin so there is no claim of "bait-and-switch" that can come up.

Al, I understand your point but I still contend 2 tables are not required.

Let's say the margins are based on LTVs =< 80%, 80.001% - 90% and >90%. They could use the margin for the 80.001% - 90% LTV as a recently used margin for their table and be within compliance with the reg. And, unless they have like a 3 or 4% (usually, what I've seen in these is a 1/2 to a 1 1/2% swing) swing in the margins for each tier, I don't think they would have to worry about the "bait and switch", nor deceptive practices.

You've apparently never been to California (or at least never worked with [?] CA District Attorney's who have a budget funded with penalties extracted from banks and other lenders).

Check the California state specific forum for your amazement (or amusement).

You are correct, I've never been to CA nor dealt with CA law (nor do I want to (deal with the law) based on some of the things I've skimmed over in the CA forum). My comments are based strictly on my interpretation of Reg. Z reqirements.

Al-
Should we use the current index or the floor offered by the institution in the Historical Table?
For example; in July 2002 the index was 4.75, at that time the institution's floor was 6.00. Should the historical table include the current index of 4.75 or the floor of 6.00? Also, the margin is 0%. Thank you in advance for your assistance.
Sheila

Dan, maybe the fact we have a 4+ spread between our low and high rates comes into the discussion as well.

Shiela, Check:

§226.5b(12)(xi) An historical example, based on a $10,000 extension of credit, illustrating how annual percentage rates and payments would have been affected by index value changes implemented according to the terms of the plan. The historical example shall be based on the most recent 15 years of index values (selected for the same time period each year) and shall reflect all significant plan terms, such as negative amortization, rate carryover, rate discounts, and rate and payment limitations, that would have been affected by the index movement during the period.

Reviewing Reg. Z; I must assume we would use the floor rate (as the APR) along with the index in the historical example?

Thanks Al

I would. But, I would also call advertising "prime + 0" with a floor of 6% improper.

We have a product that is Prime + 0 with a floor of 6 also. I'd be glad to send you an example of the prelimiary disclosure if you'd like, however it will be Tuesday before I'm back in the office so I won't be able to send it until then.

That would be great! When you have the opportunity, please forward your information to me, it would be very helpful. Thank you very much. -Sheila

Sheila, it's on its way.