We have a customer with a $800,000 Home Equity loan line of credit (2 years) that matures 12/23/24. They will pay the loan down to zero and then we will "renew" for a reduced amount of $200,000. Does this need a change in terms agreement or would it just be a new loan? The loan department wants to do a renewal with a change in terms agreement so the customer doesn't have to pay additional fees.

Why not do a new loan and just waive the fees?

If the line of credit is the only change then we would do a modification (change in terms). However the change in terms would need to take place before the HELOC matures. Once it matures you will have to treat it as a new plan.

https://www.bankersonline.com/regulations/12-1026-009#c

(c) Change in terms. (1) Rules affecting home-equity plans. (i) Written notice required. For home-equity plans subject to the requirements of §1026.40, whenever any term required to be disclosed under §1026.6(a) is changed or the required minimum periodic payment is increased, the creditor shall mail or deliver written notice of the change to each consumer who may be affected. The notice shall be mailed or delivered at least 15 days prior to the effective date of the change. The 15-day timing requirement does not apply if the change has been agreed to by the consumer; the notice shall be given, however, before the effective date of the change.

https://www.bankersonline.com/regulations/12-1026-040

2. Changes to home equity plans entered into on or after November 7, 1989. Section 1026.9(c) applies if, by written agreement under §1026.40(f)(3)(iii), a creditor changes the terms of a home equity plan—entered into on or after November 7, 1989—at or before its scheduled expiration, for example, by renewing a plan on different terms. A new plan results, however, if the plan is renewed (with or without changes to the terms) after the scheduled expiration. The new plan is subject to all open-end credit rules, including §§1026.6, 1026.15, and 1026.40.

I agree, Scott. Why not just do a new loan and waive the fees.

Because if you want title insurance, that could be expensive for the lender to "waive all the fees". Why do a new loan and risk all the compliance violations that might occur associated with doing a loan from scratch and not just do a simple modification if the only change is the credit limit? Easy-peasy.

As Randy stated doing a modification is simple and the bank does not have to waive any fees. Also you don't have to go through new plan disclosures or the right of rescission like you would with a new Plan.

Don't file a new mortgage, you just do a new note and refer back to old mortgage.

That totally depends on your current mortgage/deed of trust/security agreement and State law.

Don't file a new mortgage, you just do a new note and refer back to old mortgage.

If you are referring to doing a new HELOC agreement without refiling the mortgage that does not eliminate the ROR for the new
Plan.

There is no exemption for no new money or the same creditor in 1026.15 as there is in 1026.23.