Posted By: Bear Collector, CRCM
HE Lines and Adverse Action - 01/25/01 06:37 PM
Many of our Home Equity Lines have reached the end of the 10-year draw period, and are going into repayment. We are reviewing these lines as they come to the end of the draw period, and pulling credit reports for each loan to determine if we want to offer to extend the draw period for another 10 years. Those who pass our underwriting criteria are sent a letter offering the option to extend. Those who do not, are simply allowed to go into repayment according to the terms of their Equity Line Contract. A letter is sent informing them that their draw perid has expired, and they must now repay the loan according to the terms of the original agreement.
Some folks in the bank are arguing that because we pulled credit reports,and are relying on them to make this decison, we should be sending adverse action letters. My feeling is that these people did not "apply" for credit, and are not subject to any adverse action; they are just paying as agreed. I agree that if we terminated the line early because of delinquencies or credit problems, an AA letter would be required, but I do not feel we need to do so in these cases. Am I correct? What about FCRA notices? I think all that would just be confusing to someone who never applied in the first place!
Some folks in the bank are arguing that because we pulled credit reports,and are relying on them to make this decison, we should be sending adverse action letters. My feeling is that these people did not "apply" for credit, and are not subject to any adverse action; they are just paying as agreed. I agree that if we terminated the line early because of delinquencies or credit problems, an AA letter would be required, but I do not feel we need to do so in these cases. Am I correct? What about FCRA notices? I think all that would just be confusing to someone who never applied in the first place!