I have been assisting a small institution with their compliance program. I discovered that they have been originating a type of loan they call a "closed-draw HELOC." They are using HELOC documents but fund the entire line at origination, close the draw period at that time and start the repayment period immediately. Yeah, I know. These are obviously closed-end mortgage loans regardless of the product name. The loans are subject to TRID, ATR and HMDA (they don't originate enough HELOCs to have to report them yet). I have advised them to discontinue this product immediately and either originate actual closed-end equity loans or make these actual HELOCs with a draw period that contemplates repeated transactions and re-borrowing of the line after repayment.

Now on to assessing damage. Fortunately, the ATR issue seems to be ok. HMDA (for this year anyhow) we can fix. My question--what possible liability is out there for closing these loans without TRID documents and the waiting periods that go along with them? What proactive corrective action, if any, could they take?

They have been originating these loans for some time. I'm actually fairly stunned they have never been cited in an exam.

Failure to provide closed end disclosures mean that the disclosed APR will be considered the interest rate and there will be required reimbursements galore.