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A MUST READ FOR ALL HELOC OWNERS

By Jim Cunningham

Mortgage and Lending with Nova Home Loans - BK#0902429

January 18, 2008 08:38 AM

MAX YOUR HELOC TODAY!

My sources within the banking industry tell me that next week a number of large banks will start to freeze the Home Equity Lines of Credit on many of their borrowers. This means if you have any available credit/balance on your credit line it will be frozen and home owner will NOT be able to use it. I can confirm that USAA has already started this process in the state of Arizona.

Why would banks do this?

Let's say you have a line of credit for $100,000 on your home. At the time that you took out equity to 90% of the value of your home. Currently you only have $30,000 on the line of credit, but the ability to take out $70,000 more at any time. Now the bank that has your HELOC has looked at its portfolio and sees that when they lent you the money your line was at 90% of the value , now due to declining markets they feel that this line of credit could be leveraged at 120% in some markets. Not only is there collateral worth less, but the return on that investment is dropping. Prime has declined 1% over the last year and will drop another .5% by the end of the month, so the rate of return on the banks investment into your property has dropped significantly. Basically declining values and a decrease in rate of return is forcing the banks to make a decision, FREEZE ALL HELOCS.

What I know?

USAA has started doing this, Countrywide, Wells Fargo, Bank of America, Citi Bank, Chase and a long list of others will follow. There are number of banks that have completely shut down their Home Equity division, so I guess this move should be expected.

As I am writing this 2 employees left the office to go their bank to cash out their HELOC. This move by the banks make sense, so if you think you might need that line of credit you now need to transfer the money out of the HELOC and into your savings account today.

I will let you know when the official word is passed.

All the Best,

Jim Cunningham

Community First Financial, LLC

480-305-8900 Ext. 305

602-434-8261 Cell

480-718-8802 Fax

jim@cffinfo.com

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Chris Pollinger

Berman & Pollinger, LLC. - San Diego, CA

Consulting for Luxury Teams and Brokerages

This also happened in the last cycle of the 90's in California. Although it was done on a more case by case vs a general rule.

Jan 18, 2008 09:08 AM

Keith Hoffman

1st Advantage Mortgage - Lombard, IL

1st Advantage Mortgage - Residential Mortgage Specialist

I would love to know if Charter One is in line to do that. I sure hope not

Jan 18, 2008 09:43 AM

Scott Wall

StoneHouse Realty, Inc - Bristow, VA

Are you saying folks should go ahead and cash out. Else loss the line.

Jan 18, 2008 01:21 PM

Nova Home Loans - BK#0902429 - Phoenix, AZ

Are you saying folks should go ahead and cash out. Else loss the line??

Yes - if you have intention of using your current Home Equity Line for anything in the next year, you should cash out that amount now (or Max it). After the banks set your new limit (at your new current balance) you should be able to pay the line back down without lowering your limits again.

If these rumors prove to be false - then you pay some interest on what you took out, and pay the line down later. But the worse-case scenario is that the bank lowers your current line down to exactly what you currently owe and you have no access to that money.

Jim

Jan 21, 2008 02:17 AM

Anonymous

tom

Yes, the CharterOne is freezing the lines. Your line may be already frozen. I found about mine by checking the balance online. It had zero available credit. Another way to find out is to write a check and wait for it to bounce. They did not send any notification in writing despite contractual agreement and when called they said that it was closed on 2/17.

Feb 25, 2009 07:52 AM

Bingo! That was me. I went to write a small amount against my Charter One, no notice from them as they claimed, and the check plus others bounced. FYI...I have a 1st of 234K, Charter had my limit at $250K ad I had used $60K on remodel here in So Cal. Comps the past two months are going for $525K.

Whatever, Schwab took me in a heartbeat, albeit at a higher rate, but now....it's the principle of the issue at this time with me. Bye Bye Charter..they can go you know where.

Oh and good luck getting anyone to explain it to you. Three phone call to separate numbers and they told me to write a "letter of appeal". I can tell you, I'll never do business with them again.

Best of luck

Mar 21, 2009 03:22 PM

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