We have a large number of HELOCs that are interest only maturing in the next 12 months. These HELOCs were made 10 years ago. There are some borrowers who are not going to be able to prove their income now and in those cases we are going to need to do a work out, and amortizing their debt. I believe when we amortize those, we will they will come under the Ability to Repay rules.
The question has arisen as to whether these HELOCs qualify under 1236.43(d) for the refinancing of a non-standard mortgage. 1026.43(d)(1)(i) says:
(d) Refinancing of non-standard mortgages. (1) Definitions. For purposes of this paragraph (d), the following definitions apply:
(i) Non-standard mortgage. The term non-standard mortgage means a covered transaction that is:
(A) An adjustable-rate mortgage, as defined in § 1026.18(s)(7)(i), with an introductory fixed interest rate for a period of one year or longer;
(B) An interest-only loan, as defined in § 1026.18(s)(7)(iv); or
(C) A negative amortization loan, as defined in § 1026.18(s)(7)(v).
HELOCs are not a covered transaction under 1026.43, so even though the loan is currently interest only, I believe that they are ineligible for the rules in 1026.43(d).