Are Home Equity Lines of Credit (HELOCs) included in the definition of a subprime mortgage loan?
• Only those simultaneous second lien HELOCs that permit the borrower to defer the payment of interest or principal, as well as any HELOC that meets the applicable high-rate high-fee thresholds set forth in 8-103 (1-A)(FF) of the new law, are included in the definition of a “subprime mortgage loan.” As a result of P.L. 2007 chapter 471, “An Act Relating to Mortgage Lending and Credit Availability” this answer modifies Advisory Ruling #111 (As See AR #111, Exclusion of HELOCs from definition of “sub-prime loan”.) Simultaneous second HELOCs that are “convenience” HELOCs as described in Advisory Ruling #116 are not subprime mortgage loans if a) the convenience HELOC is not drawn at closing to satisfy first mortgage lender’s equity requirement, or to avoid payment of PMI and b) the combined LTV of first and second lien is 90% or less.
