LIBOR CFPB FAQ HELOCs 12 – What if the HELOC contract does not allow index replacement until LIBOR is no longer available?

Compliance > Regulation Z - TILA > LIBOR Transition
Q:  What if the HELOC contract does not allow index replacement until LIBOR is no longer available?
 
A:   As discussed above in LIBOR Home Equity Line of Credit FAQ 5, a creditor may only replace the index on a HELOC account if certain conditions are met. Relevant to the LIBOR transition, two options for replacing the index for a HELOC are: 1) when LIBOR is no longer available (Unavailable Provision) or 2) on or after April 1, 2022, (LIBOR-Specific Provision). Contractual language may limit which option in Regulation Z a creditor may use, and which replacement indices may be selected. Contractual language may also require a creditor to wait until LIBOR is no longer available before it replaces the index. Comment 40(f)(3)(ii)-1. For example, certain reverse mortgage contracts limit the creditor’s ability to change the index and the options for replacement indices.
 
 
This Q&A was created based on information from the Consumer Financial Protection Bureau’s website (which may be updated from time to time) that provides Answers to Frequently Asked Questions on the Transition Away from LIBOR.  This information may be found here:  https://files.consumerfinance.gov/f/documents/cfpb_libor-transition_faqs.pdf
 

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