A year ago, the federal banking agencies and the Conference of State Bank Supervisors issued the Interagency Guidance on Home Equity Lines of Credit Nearing Their End-of-Draw Periods. The Guidance identifies the components of an effective program to work with borrowers reaching their home equity line of credit end-of-draw periods to manage risk and avoid unnecessary defaults. The OCC raised this issue again in its Spring 2015 Semiannual Risk Perspective, identifying end-of-draw period exposure as one of the largest risks facing national banks. The OCC predicts that there are $131 billion in HELOC balances outstanding that are scheduled to transition from draw period to full repayment between 2015 and 2017. If a significant portion of your bank’s HELOC portfolio will reach the end-of-draw period soon, you should review the considerations outlined and implement a management program including policies and procedures to address these exposures.
This Client Alert was republished by The Banking Law Journal in its January 2016 issue. Click here to read the republished article.
