Home Equity Line of Credit ...now risky too !

Discussion in 'Economics' started by 2ez, Mar 25, 2007.

  1. 2ez


    on the news they can't say two words without saying subprime

    I read that HELOC's are now seen as very risky due to a lot of 100% financing and that they are second lien and with the way the RE market is a lot of companies are not doing them anymore at all or severly curtailing them.

    Then I read this in a blog...seems HELOC are being reduced for lower FICO scores and/or reduced values in homes:

    I opened a 100k heloc last May through a mortgage broker with citibank. There is now a 47k balance. This is the only loan on the property which they appraised at 230k. No missed payments or late payments, all was well until i got my statement yesterday which reduced my line from 100k to 48k. No letter, no phone call, no explanation whatsoever.

    I dig out my loan documents which list the usual reasons for such an event to transpire.

    1. Property value reduction

    2. material change in financial circumstances:

    3. citibank is notified by its regulatory agency that continued advances constitute an unsafe and unsound practice: No idea what this could mean.

    So i called the Texas call line to get this rep to tell me indeed the line limit had been halved but no explanation was available. My fico scores are 644, 654 and 694. The midscore at closing was 678.

    There are no new accounts on my reports, only old collection accounts(older than 5 years) that were on my reports when the loan was approved.

    My question is how do i respond? My first thought is to just get a new heloc but then i would have the early termination fees that get tacked on to accounts open for less than 36 months. Has this happened to anyone else and do i have any recourse?
  2. nkhoi

    nkhoi Moderator

    do nothing, soon after I paid off my HELOC line, they just closed it. My guess is the guide lines had changed and they want to re-qualify everybody under the stricter guide lines.
  3. thats a very marginal credit score. i just got a home equity loan at 90% loan to value at prime minus 1. but my credit score is 795 and i have 320k of credit card lines open with zero balances and have had these credit cards from 4-18 years.i'm suspecting either your home value is in question or your credit score scared them
  4. Exactly.
  5. 2ez


    Here is another reply received in the blog:

    I don't have your note in front of me however anytime a lender leaves a broad based statement like "material change in financial circumstances" then you don't have a specific enough issue to fight them with......They made a business decision.......the decision may have been no more HELOC's over 50k for FICO's less than 660.....

    How do I know this you ask ? Because my lender is now doing this.
  6. Good call.. I am a financial advisor and I do most of my HELOCs with Suntrust.. I'll be sure to call them up in the morning to see what the deal is.

    Thanks for this!
  7. 2ez


    Please post if any changes were made at Suntrust....or if there are any slated for the near future.
  8. Ahhhhh yes, the sub-prime credit crunch...... nothing quite like it.

    They're probably doing you a favor that you don't realize just yet.
  9. If one is about to get foreclosed on, is the lender able to take whatever assets you have remaining to satisfy a deficit on a loan balance, meaning if the house is sold for less than the loan balance?

    Do you have to file for bankruptcy if you don't have enough assets to cover the deficit or do they just take what they can get without one having to file for bankruptcy?

    If they can take some of your assets to cover the deficit, can't one, before they get foreclosed on, just pull out all of their money from all of their accounts and stash it away somewhere and say they lost it gambling?
  10. Is there anything in your documents that states if they change the terms of the loan, then the pre-pay penalty is null? You may want to see about that.
    #10     Mar 26, 2007