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Federal Deposit
Insurance Corporation

Each depositor insured to at least $250,000 per insured bank

Financial Institution Letters

FIL-33-2014
July 1, 2014

Interagency Guidance on Home Equity Lines of Credit (HELOCs) Nearing Their End-of-Draw Period

Printable Format:

FIL-33-2014 - PDF (PDF Help)

Summary:

The Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Period (HELOC guidance) recognizes that some institutions and borrowers may face challenges as HELOCs near their end-of-draw period. Many borrowers will have the financial capacity to meet their contractual obligations as HELOCs transition from the draw period to an amortizing or balloon payment. However, some borrowers may have difficulty meeting higher payments resulting from principal amortization or an interest rate reset, or refinancing an existing loan due to changes in financial circumstances or declines in property values since the HELOC's origination date. The HELOC guidance provides a framework for managing HELOCs nearing their end-of draw period and communicating and prudently working with HELOC borrowers experiencing financial difficulties.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised institutions, including community banks, although its application should be commensurate with the size and risk profile of the HELOC portfolio. Community banks with a small portfolio of HELOCs, few portfolio acquisitions, or exposures with lower risk characteristics may be able to use existing, less-sophisticated risk management processes.

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FDIC Financial Institution Letters (FILs) may be accessed from the FDIC's Web site at www.fdic.gov/news/news/financial/2014/index.html.

To receive FILs electronically, please visit http://www.fdic.gov/about/subscriptions/fil.html.

Paper copies may be obtained through the FDIC's Public Information Center, 3501 Fairfax Drive, E-1002, Arlington, VA 22226 (877-275-3342 or 703-562-2200).