WELLS FARGO December 23, 2009 Jennifer J. Johnson, Secretary

WELLS

FARGO

December 23, 2009

Jennifer J. Johnson, Secretary

Board of Governors of the Federal Reserve System

20th Street and Constitution Avenue

Northwest

Washington DC 2 0 5

5 1

Re:

Docket No.

R-1367

Truth in Lending Act (TILA)

Proposed Rule to Amend Regulation Z for Open-End Home-Secured Credit

74 Federal Register 43427-43613 (August 26, 2009)

Dear Ms. Johnson:

Wells Fargo & Company and its affiliates ("Wells Fargo"), including Wells Fargo Bank National

Association and Wachovia Bank, National Association, appreciate the opportunity to comment

on the proposed amendments (the "Proposal") of the Board of Governors of the Federal

Reserve System (the "Board") to Regulation Z affecting home-secured lines of credit. Wells

Fargo is a leading originator of residential mortgage loans and lines of credit and one of the

nation's leading financial services companies. Wells Fargo is committed to mortgage lending

that helps customers achieve financial success, to fair and responsible lending standards and to

offering its customers appropriate products at appropriate prices.

Wells Fargo takes its responsibility as a leading mortgage lender and servicer very seriously

and has long followed a number of responsible lending standards and practices in our consumer

real estate lending business. We provide consumers with the information they need to make

informed decisions about the terms of their credit products. These and other responsible

lending principles have been publicly posted for years on our wellsfargo.com web site. It is in

this context that we are providing a response to your request for comments.

I. Introduction

Wells Fargo strongly supports the Proposal and believes that, with some modifications and

clarifications, it will provide consumers with a clearer understanding of home equity line of credit

products. Wells Fargo wants consumers to fully understand their line of credit products and

believes that the Board's Proposal will go a long way toward providing consumers with

important information in clear and understandable formats. However, before the Proposal can

be implemented, there are issues that should be addressed to prevent customer confusion and

unintended consequences.

II.

"Key Questions to Ask About Home Equity Lines of Credit" Document

Wells Fargo has very few comments on the Key Questions document. In general we believe

the document addresses the most common questions that Borrowers have regarding home

equity lines of credit ("HELOC's"). We note that in Box 7 the form states that a home equity loan

means that the customer can borrow "a fixed amount of money at a fixed interest rate."

page

many home equity loans may be variable rate loans and many HELOC's offer fixed rate

features, fixed and variable rates are not a differentiating feature between loans and lines.

Moreover, the statement that the customer should consider a loan if the customer wants "to

know the exact amount of your minimum payment" would be misleading if a customer were to

select a loan with a variable rate or interest-only feature, which many home equity loans have.

As the Board has often reiterated, the defining difference between a loan and a line of credit is

the ability to borrow different amounts over time and the ability to pay and re-borrow during the

borrowing period. Wells Fargo suggests that Box 7 be rewritten to avoid misleading customers.

III.

Early Disclosure

Wells Fargo supports the new Early Disclosure form. We believe that it will provide more

meaningful information to consumers earlier in the process. The formatting appears to be clear

and easy to follow and the information to be provided generally appears to be the information

that consumers should find helpful. However, corrections and clarifications are needed before

this disclosure becomes

final.

Proposed Regulation

• The "no obligation" statement required by proposed 226.5b(c)(2) is confusing, Instead of

leading the applicant to believe that they do not have to enter into the transaction, the

proposed language may lead the applicant to believe that they can require the creditor to

provide different or better terms. Wells Fargo suggests that the language in the Early

Disclosure mirror the language currently in 226.19(a)(4) to the effect that the customer has

no obligation to enter into the transaction. Not only is that language clear, but it would be

beneficial to have the open- and closed-end provisions be the same where possible.

• Wells Fargo believes that creditors should be able to disclose information about fixed rate

programs. The proposal is worded with language proactively prohibiting disclosure of fixed

rate features in the table. While we recognize that the Board wants to keep the disclosure

forms as streamlined as possible, the disclosure as proposed is likely to mislead consumers,

Because loan officers should discuss the fixed-rate features as part of a complete

product explanation, if the only disclosed rate is a variable rate, consumers are likely to

believe that the fixed rate is the same as the variable rate. Even with today's disclosure

regime where all rates are disclosed in the account agreement, consumers have a

tendency to fixate on the lowest rate that they recall and believe that it is the rate for all

features. As the rates offered under fixed rate options are often higher than the variable

rates applicable at that time, this tendency, combined with the Board's prohibition on

disclosing information on fixed rate features, is likely to lead to customer confusion.

The statement that creditors "must not" disclose is so prohibitory that plaintiffs' attorneys

may argue that if a loan officer even talks about such programs or tries to provide

supplemental materials describing such programs that such communication conflicts

with or overshadows the required disclosures.

If the Board does make a final determination that creditors may not specifically disclose

fixed rate advance options, Wells Fargo proposes that creditors be allowed to include a

statement in the disclosure that "Fixed rates may be different. Ask your [insert title of

loan officer] for more information."

• Proposed 226.5b(c)(9)(i i)(B) contemplates disclosure of a maximum of two variable-rate

payment plan options offered by the creditor. It is common for there to be multiple payment

plan options. For example: (1) variable rate interest only payments during the draw period;

page 3. (2) a percentage of the variable-rate balance during the draw period; (3) fully amortizing

variable-rate payments during the draw period; (4) fully amortizing variable-rate payments

over the repayment period; or (5) fixed rate, fixed term payments, whether interest only,

partially amortizing or fully amortizing (as described above). Restricting the payment plan

disclosure to a maximum of two payment options may not provide the consumer with

sufficient information about the terms relating to the account and providing the consumer

with multiple Early Disclosures for the purpose of describing the payment plans may lead to

confusing and seemingly contradictory information for the consumer. Wells Fargo requests

that the Board carefully consider what payment option examples customers may find most

helpful and provide clear direction on what options creditors should disclose.

• The final sentence of 226.5b(c)(9)(i i)(B)(1) on balloon payments contains a triple negative

and is difficult to understand. On the other hand, a later section, Section

226.5b(c)(9)(i i)(B)(3) also covers balloon payment disclosures and the latter does so more

clearly than (B)(1). it is not clear that the two provisions are actually covering different topics

- rather it seems that there may have been a drafting error and two provisions covering the

same topic were inadvertently proposed. If so, Wells Fargo suggests deleting Section (B)(1)

and retaining Section (B)(3).

• In section 226.5b(c)(10)(i)(6), the definition of the "past 15 years" for the disclosure of the

historical index rate should be clarified. Wells Fargo suggests that the Commentary should

include a provision similar to current Comment to Paragraph 5b(d)(12)(x

i)-1.

Thus, the

requirement should be to update the disclosure annually as soon as reasonably possible

after the new value becomes available. For the disclosure tables in current law, Wells Fargo

has found that the disclosures can generally be updated within 90 days.

• Wells Fargo also notes that in the model form, the static language in the left column of the

form is "Historical Changes to Prime Rate" although the index may not be Prime. We

suggest "Historical Changes to Index."

• The fee disclosure of 226.5b(c)(11) is concerning. Rather than an estimate made in good

faith,

the estimated fee disclosure must either be exact or the highest fee possible. Having

to be exact or extreme will force creditors to the extreme, potentially causing applicants to

make inappropriate decisions based on the disclosure of atypical facts. Wells Fargo

proposes that all lender origination fees must be exact based on the program chosen, but

for third party fees, creditors be allowed to disclose ranges. Wells Fargo suggests that to

ensure that range disclosures for third party fees remain accurate, lenders should perform a

periodic analysis of fees disclosed versus fees actually incurred to identify ranges that are

no longer accurate. We propose that fee ranges for which more than 10% of the population

exceeds the disclosed range by more than the higher of $5.00 or 10% of the quoted fee

must be updated within 60 days of identification.

• The fixed rate disclosure of 226.5b(c)(18) should be revised to ensure that customers can

receive complete and clear information regarding their fixed rate options. Many lenders limit

the amount that can be converted to a fixed rate at various times during the life of the

account. For example, some programs allow the entire amount to be converted to a fixed

rate at origination, but then limit the number or amount of fixed rate advances that can be

taken (or be outstanding at any one time) thereafter. The final rule should be clear on what

is required by 226.5b(c)(18)(i)(B) so that consumers receive clear and consistent information

when the amount that can be converted (1) varies, or (2) has different limits at different

times.

page 4.

Commentary

• The comment in 5(b)(1)(i i)-2 regarding changes in terms of home equity plan conflicts with

other sections of the Proposal. This commentary would prohibit a creditor from collecting

ordinary items such as foreclosure expenses if they are more in the future than they might

have been at loan origination - a common and likely occurrence. The inability to collect

foreclosure expenses would have a dramatic economic impact on HELOC's. if it is the

Board's intent to effect such a major change, that should be clear. This new comment does

not appear to be necessary, but if it is deemed essential it should be a simple cross

reference to the pertinent section of 5b.

• Comment 5b-3(i) states that if there are options to convert to a fixed rate, those terms must

be disclosed. However, the Proposal specifically prohibits disclosure of the fixed rate

options. We suggest that these provisions be reconciled.

• In order to facilitate workout agreements that could assist borrowers to remain in their

homes, Wells Fargo requests that clarifying language be added to Comment 5b-3(i i

i).

This

provision requires new TILA disclosures if there is a conversion to closed-end and could

arguably be read to require re-disclosure even in a workout. Wells Fargo requests that this

section be clarified to provide a specific exemption to facilitate workouts of HELOC's in

default or imminent default.

• Comment 5b(c)-1 requires a proactive statement that a balloon will not result under certain

circumstances, which conflicts with other provisions of the Proposal which prohibit a creditor

from disclosing that a balloon payment will not result.

• Comment 5b(f)(3)-3 regarding fees for protection of the lien should be reworded to allow the

creditor to charge such fees even absent a borrower default. For example, it is quite

common for creditors to incur lien protection expenses in eminent domain proceedings even

in the absence of a default by a customer.

• Wells Fargo requests further examples of insignificant changes in Comment 5b(f)(3)(v),

particularly for acquisitions. For example, the nuances of fixed rate advance options are

among the most difficult to maintain upon acquisition. Creditors should be allowed to revise

these features. Moreover, a creditor should be able to change the terms of an access

device. There is an inconsistent statement in the Proposal that a creditor may eliminate an

access device altogether but cannot change the terms of the access device. Using this

language, if a creditor needed to change the terms of an access device, the creditor could

eliminate the access device altogether, then reintroduce it under the new terms as a

beneficial change. Thus, the comment should be rewritten to acknowledge changes in

access devices as insignificant. In addition, nuances in calculation of interest rates, such as

minor adjustments in interest calculations (365/365 to 360/360 or monthly vs. daily periodic

interest) should be deemed insignificant.

• The Board added a phrase regarding actual reduction of the credit limits to Comment

5b(f)(3)(v i)-2 regarding reinstatement after a customer requests suspension. The

application of this comment to actual reductions is a practical impossibility as "reinstatement"

is not a concept that applies in an actual reduction (rather than suspension) environment. If

the customer requests a reduction in the credit limit, most creditors release the lien down to

the current credit limit - in many instances this partial release is required by state law. As

the lien has been reduced as of record, there cannot be a requirement that creditors must

simply reinstate the old commitment amount upon request. Reinstatement after an actual

reduction would require a new underwriting, title review and documentation process - in

other words, a refinance transaction. Wells Fargo requests that the comment remain

applicable to customer requested suspensions only.

page 5.

• In the commentary to Models G-14 and G-15, the Board notes that the model forms were

intended to print on legal-size paper. Wells Fargo notes that most state recording offices

require letter-size paper for security instruments, thus many lenders use letter-size paper

exclusively. Weils Fargo requests that the Board keep this in mind when creating model

forms.

I V. Closing Disclosure

Wells Fargo supports the new closing disclosure form and believes that it

will,

if the Proposal is

clarified and corrected, greatly enhance consumer understanding of HELOC products.

However, as there are several areas where the Proposal lacks clarity, corrections and

clarifications are needed so disclosures will be uniform among creditors.

• Section 226.6(a)(2) still prohibits disclosing the fixed rate advance features. White Wells

Fargo understands that it is the Board's desire to keep the tabular disclosures simple, we

note that fixed rate advances can have rates that vary dramatically from the adjustable rates

offered.

Wells Fargo requests that the final rule allow an option for a fixed rate disclosure in

both the initial disclosure and the closing disclosure.

• Section 226.6(a)(3) seems to duplicate 226.6(a)(2)(v i)-(x

v),

and in doing so adds confusion

to an already complicated disclosure section.

foot note 1 Proposed 226.6(a)(3)(i i)(D) is particularly confusing. end of foot note.

If there is a specific requirement that is not

currently covered in 6(a)(2), Wells Fargo suggests that additions be made to that section

and that 6(a)(3) be deleted in its entirety. In the alternative, if 6(a)(3) was intended to clarify

the disclosure requirements in 6(a)(2), Wells Fargo suggests that these clarifications be

moved to the Commentary.

• It would be helpful for the Board to provide examples of the 226.6(a)(2)(v

i)(A)(i

requirements relating to changes in the index and resulting changes in payment amount,

and how a variable rate formula (after the introductory rate) would be disclosed as required

by 226.6(a)(2)(v

i)(B).

• The "no obligation to accept the terms disclosed" in the account opening disclosure as

required by 226.6(a)(2)(x x i v)(A) may be more confusing in the final disclosure than in the

early disclosure. At this point the customer is entering into the transaction and the only way

to not accept the terms is either 1) not to sign the documents; or 2) if the right is available, to

rescind.

A statement that the borrower "has no obligation to enter into the transaction"

would be less confusing and would be more consistent with the closed-end proposal.

• The statement that the customer should check to be sure that there were no changes from

what the customer applied for is likely to leave the impression that the 3-day disclosures are

a guaranteed deal or that the customer is entitled to receive exactly what they applied for.

226.6(a)(2)(x x i v)(B) & Comment 6(a)(1)-1(x v

i).

This conflicts with statement in the early

disclosures that the terms may change and is likely to cause considerable confusion as the

early disclosures are only an estimate. We suggest: "Please review the terms carefully as

they reflect your account."

page

In addition, because there could be significant terms that are not

disclosed in the account opening disclosures, such as fixed rate and payment options, Wells

Fargo also suggests that there should be a statement that the disclosure is for reference

only and the agreement contains the terms that govern the account.

Commentary

• Commentary 6(a)(3)(i i)-2 will likely add to the complexity of the account opening disclosure

and goes beyond required account-opening fees. This Commentary addresses fees that

are future fees that, if incurred, would be done so voluntarily by the customer. For example,

if a customer later requests an expedited delivery of an access device, if the servicer at that

time offers such a service, the fee for that service should be disclosed at that time.

Similarly, fees for payment by telephone or internet are purely voluntary on the part of the

consumer and may change over time depending on the servicer. To require disclosure of

those fees at account opening would be difficult, if not impossible, and as such fees are

purely dependent on later voluntary actions by the customer, it would make greater sense to

disclose those fees at the time the service is requested. Moreover, with respect to fees for

payment through the internet, the deposit or online areas of a financial institution may

impose charges for internet bill pay services that are not related to "the

plan."

If any portion

of the comment relating to internet bill payment remains, the comment should clarify that

such internet bill pay charges that are unrelated to the HELOC plan are not intended to be

included in the HELOC disclosures.

V. Periodic Statement

The periodic disclosure changes pose significant implementation challenges for servicers.

Currently, Wells Fargo discloses transactions (including payments, charges, interest and fees)

in chronological order. Moreover, currently Wells Fargo discloses each fixed rate advance

separately, so the fees, interest and payments applicable to that advance are shown separately.

Thus,

changing to a grouped disclosure, while possible, will require significant programming

changes. Wells Fargo therefore requests at least two years to implement these requirements.

Moreover, while Wells Fargo applauds the simplicity of the disclosure, customers will not be

able to see how payments are allocated among interest, fees, and the principal on separate

advances. This may cause customer questions and confusion. As there may be different rates

and fees on different advances (including different fixed rate advances), it might be difficult for a

customer to understand the periodic statement if the rule is adopted as proposed. Wells Fargo

requests that the Board carefully weigh simplicity against customer confusion in arriving at a

final rule.

Requiring servicers who acquire accounts to report fees and charges assessed by the previous

servicer prior to the acquisition as set forth in Comment 7(a)(6)-6 may be a difficult, if not

impossible task. The seller and acquirer should be able to split the task, with each being

responsible for the portion of the year during which they serviced the

loan.

For example, it is

very common for servicers to each issue a 1098 for the portion of the year that they serviced the

loan.

New Comment 7(a)(6)-7 lays out requirements upon "account replacement," but does not define

what this term means. If "account replacement" is intended to include a refinance, the comment

would be difficult, if not impossible, to comply with as the two accounts are completely separate

plans.

Moreover, disclosing fees and charges for an earlier plan on the disclosure for the

current plan is likely to cause considerable customer confusion. On the other hand, if "account

replacement" is intended to cover those instances in which it is the same

plan,

but the account

number is replaced due to systems conversion or fraud, then the requirement would make

sense.

Wells Fargo requests a clarification that this section is intended to cover only the latter

scenarios.

page 7.

Finally, in Model Form G-24(B) the reference to a fixed rate advance as a

"loan"

is incorrect and

could be misleading.

V I. Line Terminations, Reductions and Restrictions

Wells Fargo applauds the Board's attempt to add clarity to the rules on terminating, restricting

and reducing HELOC's. On the whole, the Board's proposals add certainty to an area that has

given rise to unnecessary litigation and provide important guidance to creditors. Wells Fargo

requests a few additions and clarifications to the Board's Proposal.

Wells Fargo agrees that before terminating and accelerating a HELOC for non-payment, the

payment default should last for 30 days. However, Wells Fargo requests that the Board make it

clear that a creditor may temporarily restrict for non-payment immediately upon payment

default. Creditors should not be required to extend additional credit to any customer who is

currently in default of their payment obligations. Moreover, creditors should be able to terminate

the account for non-payment for repeat offenders without waiting for 30 days, even if the

account is not accelerated.

An issue that has arisen often is that servicers need flexibility to act on accounts where there is

fraud,

but not necessarily fraud by the borrower. An unfortunately common occurrence is that

the creditor becomes aware that the borrower may be the victim of a fraud. Unfortunately,

criminals will convince victims (often the elderly) to take out, increase or draw down on a

HELOC to obtain funds to pay to the criminal. Many of the so-called "Nigerian fraud" scams

take advantage of this vulnerability. A servicer may become aware that the borrower is being

victimized,

or may note unusual activity on an account that warrants investigation. Wells Fargo

requests that the Board provide a clear safe harbor for servicers who become aware of or

suspect fraud (even with the borrower as victim) to restrict the account to further draws until the

issue is resolved. A related issue that is increasingly common is that the servicer becomes

aware of unusual or criminal activity in connection with the borrower's other accounts with the

institution,

such as deposit or credit card accounts, but has not yet found evidence with respect

to the HELOC. It is an incongruity when an institution is requesting a borrower to exit ail

relationships with the institution due to suspicious activity (and may even be legally required to

close such accounts), but must hold open the HELOC to further draws. Wells Fargo requests

clear authority from the Board to restrict accounts where a borrower appears to be involved in

fraudulent or criminal activity with respect to other accounts.

Wells Fargo also requests that the Board grant clear authority to suspend a HELOC when

requested by any party in title to the property securing the line. Owners should not have to

watch helplessly as a co-owner with a gambling addiction (for example) borrows against their

property. While these non-borrowing co-owners did voluntarily sign the security instrument, it

often comes as a surprise that once the security instrument is signed, the non-borrowing co-

owner cannot limit the damage being done to their equity if they later determine their decision to

have been imprudent.

Wells Fargo requests that 226.5b(f)(2)(i i i) be clarified to provide that if the plan is unsecured, the

creditor should be able to temporarily restrict the HELOC until the issue is corrected, whether or

not the lack of security is due to an action or inaction by the borrower.

page 8. There are a few technical issues with other proposed language. The language of

226.5b(f)(3)(v i)(A) is circular. To paraphrase, the language now states "the home's value

declines below the value." The language should read "the current value of the dwelling that

secures the plan declines significantly below the dwelling's value at the time of origination for

purposes of the

plan."

Moreover, the proposed "federal law" language is too narrow. There

should be a clear rule allowing restriction if "applicable law" requires it, both in Section

226.5b(f)(3)(v i)(G) and Comment 5b(f)(3)(v

i)-9.

As for the reinstatement requirements, Weils Fargo believes that the Board's proposal generally

provides measured clarity for both creditors and consumers. Wells Fargo has no objection to a

30-day limit to consider a reinstatement decision. However, we propose that the time period

must begin to run from the date ail information needed from the customer has been received.

For example, if income documentation is needed the thirty days should not start until the

customer has provided the documentation to the servicer.

Wells Fargo does not object to the proposal that the creditor must cover the cost of the initial

investigation, except when a new appraisal is required. The current practice at Wells Fargo and

many other large servicers is that if a customer believes that the valuation is incorrect, the

customer may pay for a valuation; if the valuation supports reinstatement, the creditor will

reimburse the customer. Based on current volumes of appraisal requests and the rates at

which the appraisals support the reinstatement, shifting the expense of appraisals that do not

support reinstatement to the creditor would be approximately $250,000 a month or $4 million

per year for Wells Fargo alone. Before the Board imposes such a significant cost on servicers,

Wells Fargo requests that the Board consider adopting the current common practice as the

general rule - that the creditor must pay for the appraisal only when the appraisal supports

reinstatement.

The Board has specifically requested comment on the Proposal that the customer be provided

with a copy of "the valuation" including the factors considered to obtain the value. For

automated valuations, there is no "documentation" to provide. The creditor is given only the

property address, a value and a confidence level for the value. While the property address and

value fields could be captured to be fed into a document to be provided to the customer, to

provide additional information would require third-party vendor programming changes that are

likely to be complex and difficult to achieve.

The Board has also requested comment on whether the final rule should require ongoing

monitoring in all cases rather than having the consumer request reinstatement. We believe that

an ongoing monitoring requirement would be unnecessarily costly and burdensome. Institutions

have an incentive to reinstate accounts where prudent, as they are in the business of lending

and want to encourage customer goodwill and line usage for the least risky customers.

Moreover, as property values recover, lenders who reimburse customers for valuations that

support reinstatement have an incentive to proactively reinstate. Given these incentives to

reinstate where warranted, a regulatory mandate is unnecessary.

V I I. Change in Terms

It is a hallmark of HELOC's that they are extremely difficult to change after the terms of the

account have been agreed upon by the customer. Wells Fargo is not aware of any particular

issues that have arisen out of the rare changes in terms that might occur on such accounts.

The focus in the Proposal on changes in terms of HELOC's appears to require redisclosure to,

and a possible opting-out by, one party from terms that the party has already agreed to as part

of a binding contract.

page

Wells Fargo suggests that the Board rethink the change in terms section

carefully in light of the limited changes that can occur on such accounts. If the impetus for the

Board's Proposal in this area is the imposition of higher interest rates triggered by a payment

default (which Wells Fargo believes are uncommon in HELOC's), we request that the Proposal

be carefully drafted to specify the Board's concerns and requirements in this area. In addition,

Wells Fargo can understand the 45-day notice period in connection with insignificant changes

that occur in connection with mergers, but Wells Fargo requests clarity that such changes are

what the Board intends to cover with this requirement. As currently proposed, the rule is so

broadly worded as to call into question normal and legitimate business practices and to interfere

with ordinary contractual relationships.

For example, throughout 226.9, particularly in (c)(1) and (i), it is unclear how rate changes due

to pre-agreed non-default events would be handled. For example, it is very common for

creditors to offer rate discounts for A C H payments, employment or other relationships with the

Bank. These discounts are agreed upon in advance. If the discount will be removed if the

condition changes, that must also be agreed to in advance; otherwise, under the strict rules

applicable to HELOC's the creditor could not remove the discount. Therefore, a requirement of

giving 45 days notice prior to the rate change, or allowing the customer to "opt-out" of the pre-

agreed change makes no sense in the context of such discounts - the conditions for which are

largely within the customer's control. Wells Fargo requests that the Board revise the Proposal

and the Commentary to make it clear that such contractual agreements were not intended to be

covered by 226.9 and that creditors may continue to enforce their agreements as written.

In 226.9(c)(i v) Wells Fargo requests specific flexibility for changes as a result of loss mitigation

workouts. In addition, in 226.9(i)(5) the first sentence should read "A creditor is not required to

provide a notice pursuant to paragraphs (c) or (i)(1) of this section

VIII.

Fee Refund

The Proposal as a whole is clear. However, some of the fee refund requirements are confusing

and seem to be contradictory. To ensure clarity for consumers and creditors, the provisions

should be aligned for consistency and certainty.

• In 226.5b(c)(4)(i), the creditor must disclose any term that is subject to change, thus putting

the consumer on notice that the terms disclosed are not final or guaranteed, but are only

estimated at this early stage in the application process.

• In 226.5b(c)(4)(i

i),

if any term changes (whether an increase or decrease), the applicant is

entitled to a refund of any fees paid (which contradicts the idea and disclosure in

226.5b(c)(4)(i) that some terms may change).

• The language of 226.5b(c)(4)(i i) further lacks clarity in that it implies that the consumer may

get fees refunded but still enter into the line of credit agreement.

• Since there will often be changes as a result of underwriting and even the most insignificant

(or ordinary) change (and not just in fees - in any term) results in a refund, fees will be

refundable in virtually every transaction. For example, if the appraisal were to come in low

and the creditor were to counter-offer with a reduced commitment amount, the customer

could insist on a fee refund. Moreover, if the customer were to request a change (such as

even $1 more in the loan amount), that could result in a required fee refund under the

language as proposed.

page 10.

• If a fee refund upon changed terms is to remain, the language should be clarified to be clear

that the "terms" that may not change are fees and the rate (other than a variable rate if the

index changes). Moreover, the change must not be in the borrower's favor, must be

significant (at least a 10% change in fees overall), and must not be as a result of changed or

borrower-requested circumstances. Wells Fargo suggests that rather than the "change-in-

terms"

trigger, the current requirement that the borrower may receive a fee refund within

three days of receiving the early disclosures be the model.

• Section 226.5b(c)(5) provides that the applicant can receive a refund if the applicant notifies

the creditor within three days of receiving the early disclosures. This conflicts with other

provisions which provide that there must be a change in the terms of the account, but this is

the model that Wells Fargo suggests. However, if this is the model that the Board adopts,

Wells Fargo requests a clarification of when the early disclosures may be deemed to have

been received.

• Section 226.5b(c)(22) provides that the consumer may always get fees refunded simply if

they don't want the account. This conflicts with other provisions which provide that there

must be a change in the terms of the account or that the refund applies only within a limited

time frame.

• Section 226.5b(d) provides that a customer may receive a refund if any term changes (other

than a variable rate if the index changes) and the customer elects not to move forward with

the account.

• Section 226.5b(e) discusses when non-refundable fees can be charged, but given the broad

provisions above, all fees are likely to be refundable.

• Comment 5(c)-3 recognizes that disclosures of fees such as appraisal fees are estimates

and that no redisclosure is required if the fees change. This seems to contradict the

provisions above that would seem to require 100% accuracy on fees and provide for refunds

if any term changes.

• Comment 5b(c)(4)(i)-1 discusses guaranteed terms and that the creditor does not need to

guaranty terms, but the fee refund concept does act like a guaranty of terms.

• In Comment 5b(d)-1 there appears to be an inadvertent deletion of "in connection with the

application" when describing the fees that must be refunded. Without this important

language, the fee refund requirement would be so broad that it could be argued that the

creditor must refund all fees paid by the applicant to the creditor ever (mortgage fees,

deposit account, safety deposit box etc). Wells Fargo believes that this is not what the

Board intended and requests the reinsertion of the deleted language.

• In Comment 6(a)(1)-1(x v) there is a statement that a creditor may not disclose that the fees

are subject to refund if the applicant decides not to open the account.

Wells Fargo requests that the Board enact clear, consistent and easy to understand rules

regarding fee refunds.

page 11.

I X. General Issues

In addition, Wells Fargo has some general comments on the Proposal.

Time to Implement

Many of the changes proposed will require complex process and technology changes for Wells

Fargo across at least three business lines plus our multiple sales channels for the products

impacted by the proposed regulation. Wells Fargo utilizes a disciplined quarterly release cycle

for our major technology systems across the enterprise. Typically, work for a specific release

begins at least 6-9 months prior for small-medium sized changes, 9-12 months for large

changes and 12-18 months for significant changes. The Proposal constitutes a significant

change. Moreover, because the Board is also proposing significant changes to closed-end

home secured credit to be implemented at the same time, the same resources will be also be

tapped to implement those changes.

As part of our review of the proposed regulation, we considered the amount of time required to

implement the various changes from the time we receive the final regulation:

• Key Questions Disclosure at Application - 6-9 months

• Early Disclosure - 12-18 months

• Account Opening Disclosure - 12-18 months

• Periodic Statements - 18-24 months

• Any changes to periodic payment statements require significant amounts of time for

testing to ensure accuracy for our borrowers on such a critical document.

• Change in Terms Notices and Rate Increases - 12-24 months

• Limitations on Changes in Terms - 6 months

• Account Terminations -12 months

• Suspensions & Credit Limit Reductions - 6-9 months

• Reinstatement of Accounts - 6-9 months

Need for Tolerances

Wells Fargo asks that the Board take this opportunity to close one of the existing gaps and

provide regulatory consistency between HELOC's and closed-end credit: namely tolerances for

differences in finance charge and A P R's. Currently, closed-end real estate loans are favored

with two tolerances in their material disclosures -- the tolerance for overstatement of APR and

the special tolerance for finance charge in mortgage transactions. HELOC's have neither

tolerance. Thus, if a creditor (1) discloses an interest rate that is higher than accurate; (2)

mischaracterizes a fee that is a finance charge; or (3) has even a one dollar ($1) inaccuracy in a

fee that is a finance charge, technically, the creditor has violated TILA in such a way that results

in rescission implications. The reality is that both closed-end real estate secured credit and

HELOC's include the aspects that deserve these tolerances: the extensive real estate closing

process and the numerous third party settlement services. Certainly, a HELOC closing involves

the same complexities, settlement service requirements and the involvement of third parties as

a closed-end real estate loan and should be afforded the same accuracy and tolerance

disclosure standards. Therefore, Wells Fargo asks the Board to extend the same

overdisclosure of A P R tolerance and the finance charge tolerance to HELOC disclosures under

226.6 as afforded closed-end credit, including increased tolerances for rescission purposes.

page 12.

Rescission

Although Wells Fargo appreciates that the Board intends to tackle rescission at a later date, due

to the comprehensive changes to the rest of Regulation Z, the Board must adopt conforming

changes to footnote 36 to identify the new material open-end disclosures for rescission

purposes. The cross-references in that footnote are to sections that will no longer exist and to

disclosures that are not part of the tabular disclosures. Wells Fargo proposes the following

language:

The term material disclosures means the information that must be provided to

satisfy the requirements in § 226.6{a)(2)(v i) regarding the interest rate,

§ 226.6(a)(2)(v i i i) regarding the amount or method of determining the amount of

any fee for the availability of the

plan,

and the payment information described in

§226.6(a)(2)(v)(C)(2).

Business Day Definition

Wells Fargo suggests that the general definition of Business Day be dropped in favor of the

more exact definition of "all calendar days except Sundays and the legal public holidays . . . ."

The general definition could cause considerable confusion as customers are increasingly able to

access banking functions at all times via online, mobile or phone banking systems, in a mobile

society, more institutions may have branches in grocery stores or other locations that are open

on Sundays and holidays for some functions but not others. With these multiple access points

to banking services, the general definition lacks the clarity necessary for consistent and certain

compliance. Wells Fargo requests simplification and certainty with respect to this definition and

suggests that the more exact definition be used for all purposes.

Applicability of 226.5b and other HELOC provisions to rental properties

Most creditors, and certainly Wells Fargo, look to the purpose of the credit and the rules of

226.3 to determine whether a line of credit secured by rental property is business purpose and

thus outside of the scope of TILA. For homes owned by individuals for rental purposes, if the

analysis under 226.3 reveals that the HELOC is not business-purpose and should be covered

by TILA, then Wells Fargo believes that most creditors apply the rules applicable to home equity

lines of credit under 226.5b and the other provisions regarding HELOC's. The suggestion that

non-business purpose rental property HELOC's should be subject to an entirely different

statutory scheme that was not designed to reflect the complexity or timing of real-estate secured

products is daunting. Creditors generally originate and service personal rental property lines of

credit on the same systems as ordinary HELOC's and apply the same documents and rules

where applicable. The difficulty of differentiating these accounts in origination and servicing

systems and building separate requirements for such accounts, as well as the difficulty of

attempting to apply rules that simply do not fit the real estate products means that it would be

easier for most creditors to simply default to the HELOC requirements if the account is covered

by TILA. The suggestion that different consumer rules, particularly the credit card rules of 5a,

should apply to investment properties, would be difficult, if not impossible, to implement.

Reverse Mortgages

While significantly improving disclosure for forward open-end mortgages, the new disclosures

are not easily applicable to reverse mortgages. Drafted with forward mortgages in mind, the

disclosures make frequent reference to "monthly payments" which, of course, do not apply to

reverse mortgages.

page

13.

To provide these disclosures to a reverse mortgage borrower will result in

confusion.

For example, the "Key Questions to Ask About Home Equity Lines of Credit"

disclosure refers specifically to possible increases in monthly payments, as well as to increases

in monthly payments due to interest rate increases. References to a repayment period are also

likely to be confusing in the reverse mortgage context.

We recommend that the Board consider providing a separate set of disclosures that are specific

and meaningful to reverse mortgage borrowers. These disclosures should be specifically

tailored to the uniqueness of the reverse mortgage program, which, although the basic terms

and conditions of a reverse mortgage are the same, can be either an open-end transaction or a

closed-end transaction under Regulation Z. It would be beneficial to a reverse mortgage

borrower to receive the same or similar disclosures whether or not their reverse mortgage is

open-end or a closed-end transaction.

X. Conclusion

Wells Fargo appreciates the opportunity to provide these comments on the Proposal and we

respectfully ask that you consider our comments and recommendations. We strongly support

the spirit of the Proposal to provide clearer consumer disclosures and to strengthen consumer

protections. We have pointed out those aspects of the Proposal that we believe may have

unintended consequences or that need further clarification. If you have any questions or would

like to discuss our comments, you can contact me at

(5 1

2 1

3-4 5 7

Sincerely,

signed

David L. Moskowitz

Deputy General Counsel

Wells Fargo & Company