As we know, SCRA does not apply HELOC advances made after active duty begins. We're trying to manage to and distinguish between the outstanding HELOC balance and draws made while servicemembers are in an active duty status. The Consumer Lending area is proposing to create a sub-note (i.e., a new note under the borrower's HELOC) to control the HELOC's outstanding balance and corresponding discounted rate up to the active duty date.

I was hoping to get other banks' perspectives as to how they are handling this situation. Would a sub-note for the outstanding balance be appropriate? Are there other alternatives? If a sub-note is the solution, would it require the borrower's signature or would it simply be an accounting (or equivalent thereof) entry to the bank's core system?

Thank you and I welcome everyone's thoughts and recommendations.

How does a piece of paper assist you in servicing the loan? Why do you need another note? If you can, you segregate the balances in your servicing system. Then the question is, to which balance do you apply any payments.