HELOC fees

We were told by an examiner when we first started doing HELOC's a number of years ago, that we couldn't advance the fees directly from the HELOC to our loan fee account. We would need to advance the fees to the borrower's checking account and have him write a check for those fees. I cannot remember the reason why though and I need to explain it to our new lenders. If I remember correctly, it had something to do with finance charge??? Can somebody help please - thank you!

Whether you advance the closing fees to the borrower's checking account or to your GL account the first advance is still financing start up fees and the initial periodic statement would have to make the required disclosure in 1026.7.

8. Start-up fees. Points, loan fees, and similar finance charges relating to the opening of the account that are paid prior to the issuance of the first periodic statement need not be disclosed on the periodic statement. If, however, these charges are financed as part of the plan, including charges that are paid out of the first advance, the charges must be disclosed as part of the finance charge on the first periodic statement. However, they need not be factored into the annual percentage rate. (See § 1026.14(c)(3).)

It is not prohibited. You just have to disclose them on the first periodic statement correctly. See the commentary to 7(a)(6)(ii) Other Charges.

Are there regulatory requirements if you switch from 1026.7(b)(6) to 1026.7(a)(6)?