Lenders slam the door on home-equity lines of credit

also, when you apply, notice how they SERIOUSLY undervalue your home!

Wow last I saw people still need a roof over their heads, if the banks would lower the interest rates, and help home owners in the bad times then when the good times come around they could raise it back, it seems the cycle is backwards, so we all have to ride the same wave. I locked my rate in a 5.25% even when it was around 9.00% so who wins and who loses? people gotta live.

The same thing happend to me with Countrywide. But, keep in mind that certain HELOC loans have a penalty if they are closed in less than 5 years (due to the house being sold or whatever). So, when my loan was "frozen", I told them to close it but waive the penalty fee. They agreed and I saved $400.

Mach II wrote:

Sounds like the banks are "overdrawn" due to their own negligence and now they are punishing the good customers....Glad I don't have or need a home equity line........

No.
That's not it.

Banks are JUST NOW starting to do what they should have been doing for the last 10-15 years...proactively, and dynamically, assess their risk levels on a per-loan basis.

""For some homeowners with credit-card debt, home-equity lines have been a low-cost consolidation tool.""

And that...is the EXACT kind of financial stupidity that the banks are looking to stop.

What financial moron thinks it's a 'good idea'...to pull equity from a long term investment in order to pay off the debt acquired with a short term purchase?

The LAST thing these banks need is for joe-lunchbucket-consumer to burn up all his equity in his home buying iPhones, flat screen TV's, even vehicles...from lines of equity (all which DRASTICALLY drop in value)...then walk away from the house...(with all the 'stuff')...and they have no LEGAL right to get any of it back.

People were using their LOE's as an unsecured lifestyle-financing tool.

That's just stupid....and a HUGE risk to banks.

I knew this 'crimp' would come when I started reading about 'reverse mortgages'.....bet those have dried up too!

Bank of America froze our home equity line of credit as well without any notice; just a letter saying the funds were no longer available. The BoA supervisor I spoke with admitted that the reason they did not send out any prior notice was because they did not want us to rush out and spend the remaining credit line. So we're being penalized based on some presumed intent. Next they'll want to foreclose because they assume that borrowers will some day die!

Edward wrote:

I am laughing while reading this article, because just yesterday I received a letter from my bank saying that I have been preapproved at 4.25% for a home equity line of credit. I keep getting other offers from credit card company where it is zero % for the next 12 months with no balance transfer fees and after that my rate will never go over 12%.
I wonder what some of these peoples true credit rating is, but than I did not rush out to buy a new home or car.

I'm laughing that you're ignorant enough to actually think that they'd approve you!

They wouldn't...but they'd damn sure keep your 'fees' for the application process.

;-)

Read the fine print (like most people don't). They have TONS of 'outs' for not giving you a loan.

To Z dogs wrote:

Your talking about the Federal Government right?
<quoted text>

You have no clue as to what a PREDATORY lender is and just ASSume that most homeowners wish to live above their means without having any information as to the PREDATORY practices that were involved in this unfortunate incident.

To Z dogs wrote:

<quoted text>
The value of the dollar has fallen through the basement and it still has not hit rock bottom. There is not a single person that lives by, saves, earns or deals in dollars that has not lost and will continue too. To bad there is not another Bush to elect so we could have another spend what we do not have, war. Example as well as money do not trickle up they trickle down. All the tax cuts trickled to China and all the borrowing example trickled right down to the house next door.
"responsibility for the risks we choose" I did not vote for Bush. Did you? Where did Dick go now that the s hit the fan, Due Bye. Halliburtan earning are coming out soon, wonder how they did, up up and away, I bet.

I've been chuckling for awhile now.........I can't wait till someone comes out with the 'study' which details these foreclosures in relation to political party affiliation.

Yea.
Gotta just hate those conservative minded GW supporters! I'll bet the foreclosure lists are just chocked FULL of them!

This is where it starts folks.

First...they're ignorant enough to try and blame the president for THEIR stupid and ignorant financial moves.

Next..when 5%-down loans are the MINIMUM...and THREE appraisals are REQUIRED...and mortgage insurance is TRIPLE what it is now...they'll blame the 'greedy banks' for not 'lending money to the 'needy' for home loans.

And at the same time I know of at least three new banks being built right now. If times are so tough on banks one would think they would be tripping over themselves to help borrowers so over time things will iron out. wouldn't it be more profitable if the bank had a long time customer at 4.5% than a short time one at 7.0%, 8.0% or higher that eventually will fail or end up in forclosure. Notice the default rate on credit these days 29.9% jee if you have a bad month you now are stuck with a higher rate. But on the flip side most get offers of low rates at least twice a week, so instead of flipping houses now it is flipping credit companies.

simple wrote:

Wow last I saw people still need a roof over their heads, if the banks would lower the interest rates, and help home owners in the bad times then when the good times come around they could raise it back, it seems the cycle is backwards, so we all have to ride the same wave. I locked my rate in a 5.25% even when it was around 9.00% so who wins and who loses? people gotta live.

chuckle......

It's so sad to realize how little people understand about the financial system......

Explains EXACTLY why people bought homes they couldn't afford WITHOUT reading and fully understanding the terms.

Explains EXACTLY why people are stupid enough to take out LOE's for short-term valued items/uses.

Explains EXACTLY why...these banks are restricting their LOE's!

I've utilized LOE's for years. But NEVER for short term purposes or non-investment acquisitions.

I've used them for business start ups and funding capital, and other property purchases. That's it.

To utilize that which you've 'created out of your investment' for anything other than other investments.....is stupid and foolish.

But...I'm sure...because so many people have abused them...even for people like me...they'll be restricted.

And THAT people...is EXACTLY why the FED has been pumping funds into banks....to stave off credit 'tightening'.

THANK GOD they got the rewrite on the bankruptcy laws passed!

sentinel reader wrote:

<quoted text>
You have no clue as to what a PREDATORY lender is and just ASSume that most homeowners wish to live above their means without having any information as to the PREDATORY practices that were involved in this unfortunate incident.

Oh shut up.

Nobody CHASED YOU DOWN.....strapped you to a board room table with a pen in your hand...and held a gun to your head to 'sign or die'.

You should have read and ACCEPTED with MATURITY the deal!

Predatory lending.

More like 'irresponsible borrowing'.

MCPL wrote:

Bank of America froze our home equity line of credit as well without any notice; just a letter saying the funds were no longer available. The BoA supervisor I spoke with admitted that the reason they did not send out any prior notice was because they did not want us to rush out and spend the remaining credit line. So we're being penalized based on some presumed intent. Next they'll want to foreclose because they assume that borrowers will some day die!

No. Your financial information, history, and available 'credit' on that system creates a 'profile of risk'....different in info, yet equal in complexity to an 'insurance risk' in a hurricane prone region.

My point is, why should the same lenders who are condemmemd for lending money to risky borrowers now be condemmed for not extending credit on over valued homes?? The value goes down so does the room for home equity loans. Find some real news for a change.

Funny, where else you going to get a prime loan for 5.25%? If you used the loans responsibly, they are an excellent way to gain leverage to finance your personal endeavors with ZERO questions asked. The problem is, most people do not even understand the basics of finance, and make very poor decisions. Perhaps an IQ test would be a sound prerequisite.....

Gabe

Liberals Hate Facts wrote:

<quoted text>

""For some homeowners with credit-card debt, home-equity lines have been a low-cost consolidation tool.""
And that...is the EXACT kind of financial stupidity that the banks are looking to stop.
What financial moron thinks it's a 'good idea'...to pull equity from a long term investment in order to pay off the debt acquired with a short term purchase?

How is it a bad idea to switch debt from a higher interest rate, non tax deductible vehicle (credit card) to a lower interest rate, tax deductible home equity loan or line of credit? You're able to pay off the debt quicker and get a tax break at the same time...yeah, simply moronic. How about purchasing a vehicle with a home equity loan? Is that moronic, too? Instead of paying non-deductible interest to GM, I pay a lower, deductible rate to my bank on terms I choose. Yes...simply moronic.

In Republican-Land, everyone can afford a house, even if they can't.

Splinter wrote:

<quoted text>How is it a bad idea to switch debt from a higher interest rate, non tax deductible vehicle (credit card) to a lower interest rate, tax deductible home equity loan or line of credit? You're able to pay off the debt quicker and get a tax break at the same time...yeah, simply moronic. How about purchasing a vehicle with a home equity loan? Is that moronic, too? Instead of paying non-deductible interest to GM, I pay a lower, deductible rate to my bank on terms I choose. Yes...simply moronic.

No.
You're not paying off quicker.
You're taking what should be a 'short term debt'(usually able to be paid off in 3-5 years), and stretching it out over a 30 year rolling average.
Yes...it becomes tax deductible debt at that point....but the interest you'd pay over the LONG term relative to the value of money and time makes it a poor choice....especially given the recent rise in inflation and drop in dollar value.

Rolling $1000 into some home equity situation these days, and paying it off over the long term (because people are NOT going to rush out and pay off their mortgages quicker than credit card debt)...would be akin to spending $3000-$5000 to pay off that same $1000 in debt...by the time you calculate for interest rates and buying power over the duration of time.

Splinter wrote:

<quoted text>How is it a bad idea to switch debt from a higher interest rate, non tax deductible vehicle (credit card) to a lower interest rate, tax deductible home equity loan or line of credit? You're able to pay off the debt quicker and get a tax break at the same time...yeah, simply moronic. How about purchasing a vehicle with a home equity loan? Is that moronic, too? Instead of paying non-deductible interest to GM, I pay a lower, deductible rate to my bank on terms I choose. Yes...simply moronic.

To put it this way...would you want to go out and get a vehicle and get 30 year financing on it?....on a vehicle that may only last you 5-7 years? Think about it. TWENTY THREE years later...you're still paying for a vehicle you haven't had for quite some time......not to mention the other 'short term' debt items that you 'rolled into' that mortgage........

No.
Pay as you go.
If you can't afford to pay for it with cash, then you shouldn't be putting it on a card...unless it's for business purposes.
The ONLY debt which is 'sound' debt to carry on the 'short term', is business related debt. In that scenario, it's tax deductible as stands....

I agree with you completely.

Why anyone would see this as a bad thing needs to start a savings account.

chuck P wrote:

Am I the only one who thinks home equity loans are a bad idea? A home owner's goal should be to pay-off the house as soon a possible. Fiscal discipline means having an emergency fund for those unexpected expenses and not going into debt for junk we can't afford.
This could be the best thing to happen to those addicted to credit.