On July 1, 2014, Office of the Comptroller of the Currency (OCC), by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Ad ministration (NCUA), in conjunction with the Conference of State Bank Supervisors , issued supervisory guidance on risk manage ment practices for home equity lines of credit (HELOC) approaching the end-of draw period.
The release noted that "[a]s HELOCs approach scheduled maturity or repayment phases, borrowers could face substantial payment shock when they are required to start amortizing principa. Borrowers may be unable to meet new payment terms or refinance existing debt as economic conditions and property values may have changed since origination."' The guidance encourages lenders to manage risks in a disciplined, prudent manner : to work with troubled borrowers to avoid unnecessary defaults; and to engage in appropriate risk recognition.
The guidance promotes an understanding of potential exposures and describes consistent , effective responses to HELOC borrowers unable to meet their contractual obligations. The appropriate accounting and reporting procedures for HELOCs nearing their end-of draw periods are also discussed.