Home Equity Lines of Credit
When Denis Lopez bought two new tables, a lamp and a chair, his intention was to finance the purchase with a credit line against the available capital value of your home (HELOC by its acronym in English). But soon learned that that was not possible, your HELOC had been frozen.
Lopez made purchases for his apartment in West Palm Beach, Fla., with his American Express card, and then covered the expenses with a check from your account HELOC.
"Not only what I refused, but American Express took me a check for $ 35 uncollectible" account. He had not spent anything in his line of credit linked to the aggregate value of your home or home equity loan, when he made the transfer and said that he did not need to use it, but I wanted to record any activity on the account if I wanted to use it in the future.
The situation Lopez is not unique. Lenders have been canceling accounts receivable due to falling property prices and mortgages that have entered into default. Lenders say they reported it to borrowers when making these changes, often by letter.
Lopez said he did not receive any letter, although their lender, HSBC, ensures that commanded. If a customer does not realize in time, can return the surcharge by cheque uncollectible, if they can prove that it was implemented, said Francine Minadeo, in charge of public relations for HSBC.
Lenders say they have been reducing the existing HELOC accounts because there have been substantial losses in property values. But banks like Bank of americas and Washington Mutual say that there is a process so that customers can appeal these decisions.
"If the owner cree that his situation is different, you hear, especially if you have an independent appraisal showing that the value of his house was not affected by falls in the value of housing in their neighborhood," says David Bradley , Spokesman for Bank of americas.
However, as can demonstrate Lopez, appeals do not always work. There was no way to get your lender to change their minds.
It's easy to understand that a homeowners, especially one that has its debt under control, feel cheated when their credit line available turns out to be invalid, said Greg McBride, financial analyst for Bankrate.com
In fact, it sometimes seems that "banks freeze the accounts HELOC first, and then evaluate each case," says Julian D. Hebron, vice president and mortgage consultant for RPM Mortgage in San Francisco. In one of its clients froze credit recently despite earning a lot of money, has enough free capital accumulated in his home and has a credit history "perfect".
The reduction of a line of credit can be a compromising situation for people who are doing a renovation or that it had to pay for college.
But for others, they freeze the credit may be "a blessing in disguise," said Gary Smith, a professor at Pomona College in Claremont, California.
"There is assumed that a home is an ATM," warned Smith, adding that use that credit to buy a high-resolution television or other car is not a good idea in the long run.
If you have frozen the line of credit linked to the value of your home, and needs access to these funds, borrowers can take the following steps:
Take the initiative and call your lender. Ask why you have reduced the credit line and explain why cree that should not be so, says Hebron. It is useful to know the relationship between your mortgage and the value of your home, your credit score and the relationship between their income and their debt to discuss their situation, he adds.
Be prepared to reassess its housing. If you want to argue that the value of their property has not fallen as that of others in the same sector, consider spend several hundred dollars to evaluate your home, McBride said. We need to demonstrate that their situation is different.
Change Bank. If your lender does not change their minds, find another, advised Hebron. There HELOC lenders for people with good credit and capital accumulated in their homes, McBride said.
Prepare for a search. If you change your bank, you know you could be a lengthy process. Get a HELOC at the moment is almost harder to get a first mortgage, said Ellen Bitton, president executive of Park Avenue Mortgage Group in New York.
It is logical, McBride said: if a mortgage goes into execution, the second credit line proves to be a total loss for the lender.
