Home Equity Loan Conversion from Payment Code 6 to Fully Amortized Loan

[Melissa Jimenez]

Hello,
Our Home Equity Loans currently utilize Payment Code 6, and these loans will soon be converting to fully amortized loans. Per Jack Henry, the existing loans would need to closed and we would have to re-board as new loans.

I was wondering if any of you have gone thru this process and may be willing to share they steps/procedures you have taken.

Some items I am thinking of are as follows:

o How are you maintaining the relationship between the two loans? (Transactions codes, alerts, etc)
o What billing notices are you utilizing for the new termed consumer Reg Z loans secured by the borrower’s principal residence? (For the cycle 6 loans, we are currently using LN6245P notices. However I know this will need to change)
Thank you.

[Debbie Hinderlie]

We don’t have any of these types of loans. You are correct, to term out, you would need to close the payment code 6 loan and book a new loan because you can’t change the loan type on payment code 6 loans. We use the LN6288 statement type for all our payment code 6 loans, including our overdraft protection loan type.

You might consider looking at the LN6283 statement type for the non-payment code 6 loan type you use to book the term out portion. That’s what we use for our consumer mortgage and other consumer loans secured by 1-4 Family RE to be Reg Z compliant.

One other option you might consider it to keep the same loan type and utilize the Minimum Payment Amount and Maximum Payment Amount fields to amortize the balance. This would work if the loan is a fixed rate and the payment doesn’t change for the remaining term. We have one loan set up like this. It still cycles like a payment code 6 loan, uses the LN6288 statement, but it bills a the same payment amount each month; enough to term out the loan. We also choose to use a specific due day each month (10th). This isn’t a perfect solution, but an option. One issue with it, if there is a late fee assessed, the loan will include it as part of the payment amount billed, but due to the minimum and maximum payment amounts being used, the payment amount does not increase to include late fee amount.

Feel free to reach out if you have additional questions.

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