HELOC repayment terms

Posted By: Bec

HELOC repayment terms - 02/04/14 08:38 PM

The more I read the more confused I get. In determining DTI where there is an existing HELOC that is not a simultaneous loan, how do we figure out the payments. If it is an interest only HELOC with a draw phase only and there is a margin tied to an index?
Posted By: Mike Baker

Re: HELOC repayment terms - 02/05/14 04:16 PM

I happened to see the following question in the "Anonymous" section and thought it might be a good one to copy to this thread...perhaps Bec's question and the following one could be answered together?

Originally Posted By: Anonymous
Our bank has used 1.5% of the fully funded HELOC for the monthly payment used to qualify. The actual required payment during the draw period is interest only.

Questions: Under ATR, is this an issue? Also, if we use the preceding described approach for calculating a payment on our HELOC's but take the credit report payment amount [which is usually interest only] on other bank's HELOC's when underwriting other requests, is that permissible...or could it be deemed discriminatory?

Thank you for your input.
Posted By: hgliii

Re: HELOC repayment terms - 02/05/14 06:18 PM

HELOCs are exempt from ATR. You should not have a problem, as you cannot determine how another bank calculate its repayment. IMO.
Posted By: Mike Baker

Re: HELOC repayment terms - 02/05/14 06:24 PM

Just wondering...while I understand that HELOC's are exempt from ATR, what if you are dealing with a closed end mortgage request and the customer has a HELOC that will still be in place after the closing? For purposes of DTI calculation, what payment amount should be used? Thank you.
Posted By: hgliii

Re: HELOC repayment terms - 02/05/14 06:44 PM

We would use the payment from credit report. Again, you cannot control how another lender calculates their payments. As far as discriminating if you use the same criteria on every loan, you should be ok.
Posted By: Bec

Re: HELOC repayment terms - 02/05/14 07:46 PM

Thank you for your input. I really appreciate it!
Posted By: Mike Baker

Re: HELOC repayment terms - 02/05/14 07:49 PM

Same here. Have a great day!