§1647 Home equity plans

Summary

For open-end home equity plans with variable interest rates, the interest index used to change the rate must be a public index that the lender does not control. A lender cannot close the account and demand full repayment on its own unless the borrower committed fraud or a serious lie, failed to make required payments, or did something that hurts the lender’s security in the home. Lenders may not change important terms they must disclose unless the change is minor. They may, however, switch to a similar index if the original one disappears; stop new advances or lower the credit limit if the home’s value falls a lot, the borrower’s finances change so they likely can’t repay, the borrower is in default on important duties, government action prevents the agreed rate, or the lender’s security drops below 120 percent of the credit limit. Lenders can also make changes that clearly help the borrower for the whole term. At account opening or on request, the borrower can get the lender’s list of what counts as “material” obligations. If a disclosed term (not a variable feature) changes before the account is opened and the borrower then decides not to proceed, the lender must refund all application fees. No nonrefundable fee may be charged until 3 days after the borrower gets the required disclosures and pamphlet. If those are mailed, they are treated as received 3 business days after mailing.