• Home equity loans allows homeowners to access of the value of their home through a loan that is additional to their mortgage.currency image by Chad McDermott from Fotolia.com
  
  Home equity loan laws are in place to protect consumers from unfair lending practices. They also establish procedures that banks and other financial institutions must follow in creating a loan, from properly identifying the applicant's financial information to stating where the profits from the loan must be invested.
  
  

Disclosure of Rate Increases

• Banks and other financial institutions issuing home equity loans are required to disclose the interest rate of the loan, according to the Federal Deposit Insurance Corporation. If it's a variable rate loan, lenders must disclose conditions under which it may increase, including late payments on the loan and fluctuations in the consumer's credit rating over the life of the loan.
  
  

Community Reinvestment

• The Community Reinvestment Act requires lenders of home equity loans in a given community to invest loan profits with companies in the same community.
  
  

Responsible Credit Practices

• Lenders of home equity loans must verify the income and credit score of applicants to ensure that the homeowner can reasonably be expected to repay the loan. They also must adequately inform any loan cosigners of the repercussions of being a cosigner and what will be expected of them in the event of a default on the loan.
  
  

Disclosure of Points and Fees

• Banks or other financial institutions issuing home equity loans must make clear any fees or points that will be assessed. According to the Federal Reserve Board, loan companies traditionally charge 1 to 3 points per home equity loan, which equates to 1 to 3 percent of the total loan value. Homeowners are encouraged to shop around for the best rate and are not required to sign a home equity loan without having this information.