HELOC Renewals & Extensions
By Amy Kudlacek
Many of us know that you can extend or renew a loan without providing new disclosures. If you refinance (replace) the loan with a new loan, then new disclosures are triggered. But did you know that this only applies closed-end loans?
I had a client call awhile back with a question regarding renewals and extensions on a Home Equity Line of Credit (an open-end loan). To be honest, I don't think I had ever researched this before. I discovered that there was more to it than I initially thought.
It turns out that ALL renewals/extensions (with or without a change in terms) creates a new HELOC plan. But, you can avoid providing new disclosures if the following conditions are met:
- Customer must agree to the change in writing per 226.5b(f)(3)(iii),
- The 15-day advance notice for the change is NOT necessary because the change is agreed to by the customers, but a notice must still be given before the effective date of the change per 226.9(c)(1), and
- The HELOC must be renewed on or before the scheduled maturity date.
If the renewal occurs AFTER the maturity date, the plan is subject to all open-end credit rules, including 226.5b (application disclosure), 226.6 (note) and 226.15 (right of rescission).
Once again, the more I know, the more I realize I don't know. This is why I love (and hate) compliance. 