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#704654 - 03/21/07 08:51 PM Rescission and HECL refi
jat Offline
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Joined: Jun 2006
Posts: 10
With closed end credit, a refi by the same lender and no new money is exempt from rescission. I can't find a similar exemption for open end credit. So when we offer a spring time promotion for HECLs we let current customers get the new/lower rate. Our doc system doesn't modify HECL's so we have them sign a new note. Therefore new rescission even though funds are already outstanding on the line and the amount of the line hasn't changed. It seems crazy - am I missing something?

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Lending Compliance
#704771 - 03/22/07 01:44 AM Re: Rescission and HECL refi jat
David Dickinson Offline
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David Dickinson
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Posts: 18,762
Central City, NE
You're not. There is no "no new money" exemption in section 226.15 (the open-end RofR rules) like there is in 226.23 (the closed-end RofR rules). HELOC require the RofR EVERY time.
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#733949 - 05/17/07 02:04 AM Re: Rescission and HECL refi David Dickinson
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
I came across a real estate matrix that reads as follows:

Renewal of HELOC at or prior to expiration - rescission applicable only if there is an increase in the credit limit
Renewal of HELOC after expiration - rescission applicable with or without increase in credit limit

I'm a little confused by the "expiration"-could someone help me understand the "after expiration"? Would this be because it would now be considered a new line? I'm not finding in 226.15 where it specifically refers to rescission and maturity but I may be overlooking something. Thank you.

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#733951 - 05/17/07 02:26 AM Re: Rescission and HECL refi Jan94
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
This is completely wrong. Please read 226.15 (as I said in my previous post). You will not find an exemption for existing loans.
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#734134 - 05/17/07 01:58 PM Re: Rescission and HECL refi David Dickinson
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
Yes that's what I thought as well. I'm going to go back to the source of that matrix and see if I can get them to explain it. Thank you.

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#735193 - 05/18/07 02:32 AM Re: Rescission and HECL refi Jan94
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
Thought I would share what I found out:

"When HELOCs are renewed before their maturity date, new disclosures are not required including rescission unless the renewal includes an increase in the line. We find this authority not in 226.15, which is the most logical place since it covers rescission but in the commentary to 226.5b(1). (Comments 2 and 3) Here is the citation:

12 CFR 226.5(b)(1)

Changes to home equity plans entered into on or after November 7, 1989. Section 226.9(c) applies if, by written agreement under 226.5b(f)(3)(iii), a creditor changes the terms of a home equity plan--entered into on or after November 7, 1989--at or before its scheduled expiration, for example, by renewing a plan on different terms. A new plan results, however, if the plan is renewed (with or without changes to the terms) after the scheduled expiration. The new plan is subject to all open-end credit rules, including 226.5b, 226.6, and 226.15.

Transition rules and renewals of preexisting plans. The requirements of this section do not apply to home equity plans entered into before November 7, 1989. The requirements of this section also do not apply if the original consumer, on or after November 7, 1989, renews a plan entered into prior to that date (with or without changes to the terms). If, on or after November 7, 1989, a security interest in the consumer's dwelling is added to a line of credit entered into before that date, the substantive restrictions of this section apply for the remainder of the plan but no new disclosures are required under this section."

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#735693 - 05/18/07 04:18 PM Re: Rescission and HECL refi Jan94
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 80,713
Galveston, TX
I concur, if your only modifying an existing HELOC through a written agreement prior to expiration that no RofR exists unless you are increasing the credit line.
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#957026 - 05/09/08 07:00 PM Re: Rescission and HECL refi rlcarey
Dollye7 Offline
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Dollye7
Joined: Jun 2006
Posts: 255
Southwest USA
On a matured (renewal), open-end HELOC, we will do the R of R. However, I am confused, is one needed for each advance on the line?

Thanks!

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