HELOC and margin

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Question:

Currently, our HELOC products feature a rate determined by an index plus a margin (we utilize Prime). However, we'd like to lower the margin for the time being but not actually get rid of it. Basically, calculate the rate with a lower index for now but keep the existing margin in place for the future. This would seem to be a change in the interest of the borrower as it will allow a lower rate.

Answer:

You cannot change the index since Prime is still readily available. See 1026.40(f)(3)(ii) and its Commentary.

You can lower the margin without notification since it is a benefit to the consumer. HOWEVER, before you revert back to the original margin you need to review 1026.40(f)(3)(iv) and its Commentary concerning its relation to the notice requirements under 1026.9(c).