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HELOC and margin

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Currently, our HELOC products feature a rate determined by an index plus a margin (we utilize Prime). However, we'd like to lower the margin for the time being but not actually get rid of it. Basically, calculate the rate with a lower index for now but keep the existing margin in place for the future. This would seem to be a change in the interest of the borrower as it will allow a lower rate.

You cannot change the index since Prime is still readily available. See 1026.40(f)(3)(ii) and its Commentary.

You can lower the margin without notification since it is a benefit to the consumer. HOWEVER, before you revert back to the original margin you need to review 1026.40(f)(3)(iv) and its Commentary concerning its relation to the notice requirements under 1026.9(c).

First published on 08/07/2016

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