Q: Can the bank convert a HELOC that is getting close to its maturity date into a closed-end, amortizing loan without requiring TRID disclosures?
A: Unfortunately, no–if during the loan term a HELOC is converted from open-end credit to closed-end credit, that would trigger closed-end credit requirements, including the TRID disclosures, as set out here:
“Converting open-end to closed-end credit. Except for home equity plans subject to § 1026.40 in which the agreement provides for a repayment phase, if an open-end credit account is converted to a closed-end transaction under a written agreement with the consumer, the creditor must provide a set of closed-end credit disclosures before consummation of the closed-end transaction… If consummation of the closed-end transaction occurs at the same time as the consumer enters into the open-end agreement, the closed-end credit disclosures may be given at the time of conversion. …”
Comment for 1026.17(b)-2 Converting Open-End To Closed-End Credit:https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1026/Interp-17/#17-b-Interp-2
Also, if the bank is internally calling this action a “modification”, it still would not change these requirements. Of course, this is assuming that the conversion is not part of an established repayment phase that was part of the original agreement, as described above.
Comment for 1026.17 – General Disclosure Requirements | Consumer Financial Protection Bureau
The comment for 1026.17 is part of 12 CFR Part 1026 (Regulation Z). Regulation Z protects people when they use consumer credit.
Also, if the bank is internally calling this action a “modification”, it still would not change these requirements. Of course, this is assuming that the conversion is not part of an established repayment phase that was part of the original agreement, as described above.
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