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Merix Altering its HELOC

MerixMerix is making major changes to it’s popular HELOC product.  The goal is to make it more appealing to the company’s investors. 

Merix’s HELOC is a readvanceable mortgage that lets borrowers re-borrow money after they pay down their principle.  The mortgage was originally designed to be a single mortgage “charge.”  (i.e.  one part)

According to the company, however, the problem with the current HELOC structure is that it can’t easily be securitized.

Therefore, effective 11:59pm EDT Tuesday, March 18, the HELOC will change as follows:

  • Merix will register the new HELOC as a 1st mortgage for the locked-in portion and a 2nd collateral mortgage for the line of credit.  There will potentially be refinance costs if borrowers switch to a new lender when their term is up.  (a la Scotia’s STEP mortgage for example)  See additional comments below.
  • Clients will need to lock in at least 1/2 of their approved credit limit in a 5-year fixed or a 5-year variable.
  • No longer will the HELOC support multiple “mortgage” portions with different terms and rate types.

Merix also announced that it’s enhancing the HELOC’s commission model for mortgage planners.

Unfortunately for borrowers, these changes bring few benefits.  They’re necessary only to allow Merix to resell this mortgage to its investors.  Without these changes, the HELOC would likely disappear altogether.