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Pulling the Plug on Home Equity Lines of Credit

Countrywide Financial Corp. (CFC) sent letters to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off.

Among the lenders tightening as the Fed loosens, Chase Home Lending (JPM), which has been slowly raising credit standards since last summer, will start imposing new guidelines Monday that further restrict who will be granted a home equity line, the company said. This week, California homeowners can tap as much as 90% of the equity in their homes. Starting Monday, however, Chase won't let homeowners in certain parts of the state -- including Los Angeles, Orange and Imperial counties -- borrow more than 70% of the value of their homes.

Scott Gormley

Broker/Owner

Oak Valley Mortgage

Direct: 530-592-8362

Website: www.CALoan.com

"You Find the Perfect Home, We'll Find the Perfect Loan!"

Posted by Scott Gormley on 02/02/2008 10:35 AM

Comments (8)

california, home equity lines of credit, home equity, california home values, california mortgages, countrywide home loans update, fed rates

This post has been included in California Information

8 Comments on Pulling the Plug on Home Equity Lines of Credit

FEB

2008

It does not surprise me. There has to be some adjustment to the mess that we are in.

Scott, Al took the words right out of my mouth. If recovery is possible(and it is) then these HELOCs and Home Equity Loans can't be maxed to the edge.

The traditional access we have had as lenders for equity loans has all but dried up. I find myself referring clients to their credit union, or local banks who seem willing to lend some aggressively.

Purchase money seconds continue to become more scarce and with private mortgage insurance now tax deductable, the purchase money second is virtually out of the equation for the higher LTV loans. There are exceptions of course but this seems to be the trend for now.

FEB

2008

Thanks for sharing Scott.

Have a wonderful day!

Scott, do you think this something that will come back at some time in the future?

FEB

2008

HELOC's, 80/20's, seconds, with exception of a NO DOC program is the hardest mortgage to obtain these days and it looks like there is no end in site.

It will take a few years before we see these open up again.

Happy Selling!
Tony Grego - Indiana Mortgage Broker

The time has come for homeowners to no longer use their homes as an ATM.

I wrote a blog about this a number of months ago because a client had their Chase Heloc reduced by 50%...and our market wasn't declining at the time.

HELOC's have demand clauses and alteration clauses that allow the banks to pretty much do what they like with them...scary.

WAMU giveth, and WAMU taketh away. They gave Heloc's away like Toasters...I predict that WAMU will be aggressively shutting them down (freezing) in the next 9 months.

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