A little over a month ago I wrote about a certain lender (WaMu) starting to lock down the HELOCs of their customers, preventing them from tapping them further.  Today the LA Times had a good article on this subject and the fact these lock downs are starting to become much more extensive.

Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have left them with little or no equity.

Among the lenders taking such action is Countrywide Financial Corp., which sent 122,000 letters to customers last week telling them they could no longer borrow against their credit lines. In some cases, according to the company, the borrowers are now "upside down" -- the total debt on the home exceeds the market value of the property.

The article also goes onto mention that Bank of America and Chase are also in the process of locking down lines of credit such as HELOCs. I expect these types of letters to be going out from A LOT more lenders in the near future as the credit contraction continues.  These also may become fairly commonplace lending such as business lines of credit which unlike HELOCs can not just be locked down but typically can be called in at the banks discretion. This happened a lot during the S&L crisis as banks reserves dwindled and they were forced to make the choice between staying in business and calling back loans from customers.