§1647 Home Equity Plans

Summary

Requires that open-end home-equity plans tied to your main home use a public interest rate or index that the lender does not control. A lender cannot suddenly close your account and demand full payment unless you committed fraud, failed to make required payments, or did something that hurts the lender’s security in the home. Reverse mortgages are not covered by that rule. Lenders may not change important contract terms on their own, except small things like a billing address. They may make certain changes, though: switch to a similar public index if the old one disappears; stop or cut back new credit if the home’s value falls a lot from the original appraisal; stop or cut back new credit if the borrower’s finances change so they likely can’t repay; stop or cut back new credit if the borrower is in default; stop or cut back new credit if a government action prevents the agreed APR or makes the lender’s security worth less than 120 percent of the credit limit; or make any change that clearly helps the borrower. At opening, or if asked, the lender must give a list of what it considers the borrower’s “material” obligations. A change “benefits the consumer” only if it is clearly good for the borrower for the whole life of the agreement; the Bureau can define benefit categories. If a disclosed term (other than a variable feature) changes before you open the account and you decide not to go forward, the lender must refund any fees you paid. No nonrefundable fee can be charged until 3 days after you get the required disclosures and pamphlet. If those papers are mailed, you are treated as having received them 3 business days after they were mailed.