SB 1167 Procedures - Home Equity Lines of Credit

Home Equity Lines of Credit Need Not be Entered into Anti-Predatory Lending Database as Separate Applications

Some title agents are mistakenly requiring brokers to enter Home Equity Lines of Credit as separate applications, which, by their nature, would likely trigger counseling per Anti Predatory Lending Database procedures. A Home Equity Line of Credit (HELOC) will never trigger counseling if handled as described here:

  • If the HELOC is a stand-alone (not written in conjunction with a simultaneous first mortgage) it is an "exempt transaction" requiring only a Certificate of Exemption.
  • If the HELOC is simultaneous with a new first mortgage, the broker need only indicate in the first mortgage application entry that there is a simultaneous HELOC and state the lender, loan amount, and interest rate. Do not enter the HELOC as a separate application. The Certificate of Compliance will contain language that there may be a HELOC with the first mortgage. This Certificate can be copied and attached to the HELOC for recording.

A closed-end second mortgage (a second mortgage that has a set term and monthly payment) is a different matter. These must be entered as separate applications and are subject to the counseling rules. Questions? Please contact the ATG Underwriting Department.

Posted on: Fri, 09/05/2008 - 3:33pm