Heloc's and the new rate increase

We have a disagreement going on with the new rate increase announced today,of whether variable rate Heloc's must receive a change in terms notice. And if so, 15 days prior to the change or 15 days prior to the billing cycle?

1026.9(c)(1) of the Official Interpretation states: "no notice is of a change in terms need be given if the specific change is set forth initially, such as: rate increases under a properly disclosed variable-rate plan.....". We disclose that "the rate is tied to the index that will increase or decrease from time to time. Any increase in the period rate will take the form of higher payment amounts. Adjustments to the periodic rate and the corresponding APR resulting from changes in the index will take effect daily".

Looking for opinions.....

Thanks!

No notice is required. You already disclosed how and when the rate would change.

Thank you Randy! That is what I thought.

To add onto this discussion and ask another question if I may.

If we have applications in process and issued a 1003 disclosed at the previous prime rate of 3.25 should we send a new 1003 for these applications in process with the new 3.5 prime rate?

What does an application form have to do with the rate. Rates are disclosed on the LE and CD not applications.

The 1003 application does include the rate. I know we are covered disclosure wise because our disclosure specifically states that the rate is based on the Prime Rate and it can adjust on a monthly basis.

My thought is as long as the final 1003 matches the loan approval and documents we would be ok.

There is no regulatory requirement to even have a 1003. If you have investor requirements, check with them. Otherwise you can make your own rules.

What about WI Statue 138.056 and the notice of interest payment changes for those helocs that may be a first lien? We are looking into what we need to do for this.

Yes, from what Wisconsin Bankers Association told us 138.056 does come into play on 1st mortgage HELOC loans, if the rate change causes an increase of the periodic payment other than the final payment you need to give a 15 day prior notice. If it does not increase the periodic payment then you have 30 days after the change to let them know, so your next HELOC statement should take care of that.

Hope this helps.

Is it mailed15 days before the next payment or the rate change?

15 days before you area allowed to raise the rate.

Could I get some thoughts on the 1st lien notice requirements for WI .... do they apply to non owner occupied first lien Helocs?

Thanks