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Only flexible-rate home equity terms may be changed writes NCUA
ALEXANDRIA, Va. (3/30/10)--While federal credit unions usually cannot adjust the terms of home equity plans, Regulation Z “does not prohibit rate changes that are set forth in a home equity agreement, such as stepped-rate or preferred rate plans,” the National Credit Union Administration (NCUA) said in a recently released legal opinion. According to NCUA Associate General Counsel Sheila Albin, federal credit unions “cannot change the annual percentage rate (APR) on a home equity plan unless the plan has a variable rate.” Federal credit unions “may add a floor rate to an existing home equity loan if the original agreement disclosed the possibility of adding the rate and any associated triggering event or the borrower agrees to the addition in writing,” she added. Reg Z “specifically prohibits FCUs from changing, by contract or otherwise, the annual percentage rates (APR) on home equity plans, unless the change is based on a publicly available index that is not under the [credit union’s] control.” For the full opinion, use the resource link.
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