HELOC Suspension Letters - Section 202.9 Requirements

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Question:

We are issuing HELOC suspension letters to all customers with LTV ratios of 85% and above. I understand the notification requirements of Reg Z Section 226.9, but do not understand what is required by Reg B Section 202.9. Could you please explain what Section 202.9 would require?

Answer:

First of all, before making a blanket statement that you are going to suspend all customers with LTV ratios of 85% and above, you are going to have to make some calculations on every loan that you are planning to suspend. Suspension can only happen if the difference in the unencumbered equity has been reduced by at least 50%. You would of had to make all your equity loans based on no more than a 70% LTV to pull this off. You might want to refer to this recent FIL from the FDIC for guidance.

First published on BankersOnline.com 10/13/08