July 23, 2014 at 11:50 am EDT #6115rcooperMember
A question we received from one of our members:
We offer an unsecured line of credit. Is there any reason why the customer cannot draw the fees off of the line of credit at closing, instead of having to pay upfront? If they do include the closing costs in the initial draw, are their statement requirements?
What about in a HELOC transaction?July 23, 2014 at 11:51 am EDT #6116rcooperMember
To answer your question, if the HELOC is a high cost mortgage loan you are prohibited from taking the closing costs from the first draw/financing those fees. You might want to check Louisiana state law for any prohibitions. Also, from Reg Z regarding statements:
From Reg Z Commentary 1026.7(a)(6)(i) -8 regarding HELOC statements:
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).)
And this for non-home secured LOCs:
(6) Charges imposed. (i) The amounts of any charges imposed as part of a plan as stated in §1026.6(b)(3), grouped together, in proximity to transactions identified under paragraph (b)(2) of this section, substantially similar to Sample G–18(A) in Appendix G to this part.
(ii) Interest. Finance charges attributable to periodic interest rates, using the term Interest Charge, must be grouped together under the heading Interest Charged, itemized and totaled by type of transaction, and a total of finance charges attributable to periodic interest rates, using the term Total Interest, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in Appendix G to this part.
(iii) Fees. Charges imposed as part of the plan other than charges attributable to periodic interest rates must be grouped together under the heading Fees, identified consistent with the feature or type, and itemized, and a total of charges, using the term Fees, must be disclosed for the statement period and calendar year to date, using a format substantially similar to Sample G–18(A) in Appendix G to this part.
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