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#2168977 - 03/19/18 05:45 PM ROR on HELOC AOC - yes or no??
hfoust Offline
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Joined: Aug 2015
Posts: 12
Utah
Hello -

I have a purchase principal dwelling HELOC where the business line decided to take an AOC on the principal dwelling being sold. I know that the purchase HELOC doesn't have rescission on the purchase money, only the future advances. What about the AOC property? Technically we are not using any equity funds from the AOC property for sale, only using the value of purchase property.

I read 1026.15(f) exemption for open end and also read 1026.23(a) commentary about only one principal dwelling - which I know is closed end......I don't usually try to use closed end rules at all, however I haven't seen an AOC property on a HELOC purchase before.

Any thoughts?

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#2168979 - 03/19/18 05:50 PM Re: ROR on HELOC AOC - yes or no?? hfoust
Skittles Offline
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TN
We recently had something similar and yes - rescission is required on the existing primary residence. Although the compliance team thought this - we did reach out.

Remember - the ONLY thing the AOC relieves you of is the appraisal. All other regulatory requirements apply.
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#2169111 - 03/20/18 01:13 PM Re: ROR on HELOC AOC - yes or no?? hfoust
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
From 1026.15

6. Special rule for principal dwelling. Notwithstanding the general rule that consumers may have only one principal dwelling, when the consumer is acquiring or constructing a new principal dwelling, a credit plan or extension that is subject to Regulation Z and is secured by the equity in the consumer's current principal dwelling is subject to the right of rescission regardless of the purpose of that loan (for example, an advance to be used as a bridge loan). For example, if a consumer whose principal dwelling is currently A builds B, to be occupied by the consumer upon completion of construction, a loan to finance B and secured by A is subject to the right of rescission. Moreover, a loan secured by both A and B is, likewise, rescindable.


I'm curious. If the consumer qualified for the HELOC on the new property being purchased then what was the purpose of the AOC on the existing primary residence? Did it give more favorable terms? Did it give the consumer some tax advantage? What was the advantage to the consumer to pledge the AOC collateral? I generally find the AOC property was a "condition" of the loan which negates any and all AOC exemptions.
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#2170115 - 03/26/18 06:18 PM Re: ROR on HELOC AOC - yes or no?? hfoust
hfoust Offline
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Joined: Aug 2015
Posts: 12
Utah
I don't know why they added the AOC property because they are not requiring the funds (equity) from the sale of the AOC property to be applied to the HELOC. It may have given them a better rate.....I will look for sure.

I read 1026.15....they are not using the "equity" in the AOC property, there is no requirement to pay down with the proceeds from the sale of their home.

Does that change anything?

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#2170133 - 03/26/18 06:48 PM Re: ROR on HELOC AOC - yes or no?? hfoust
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
They took a lien on the property. How are they not using the equity to secure the loan?

As Skittles alluded to earlier the only regulatory requirement an AOC property gets you out of is the appraisal requirements.
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#2170134 - 03/26/18 06:50 PM Re: ROR on HELOC AOC - yes or no?? hfoust
rlcarey Online
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rlcarey
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Galveston, TX
It may have given them a better rate.....

And if that is true - it does not qualify as an AOC.
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