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Reducing Line of Credit - RESPA Violation?

Answered by: 
Dan Persfull

Question: 
We are currently seeing a lot of customers on whom we have second mortgage liens refinance their first mortgages. When we get a request to do the subordination (time frame 4 to 7 days), is it a RESPA violation to reduce the current line of credit amount (during that 4 to 7 days) before the closing?
Answer: 

RESPA has nothing to do with the reduction of a line of credit. However, Reg. Z's 226.5b and its Commentary has specific guidance for when you can reduce or suspend the line of credit on a HELOC. You should review those carefully.

First published on BankersOnline.com 8/31/09

First published on 08/31/2009

Filed under: 
Compliance
Filed under compliance as: 
HELOC
IT
RESPA

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