WashPost: Homeowners Losing Equity Lines

[marmar]

Homeowners Losing Equity Lines
As House Values Fall, Some Banks Withdraw Credit

By Dina ElBoghdady
Washington Post Staff Writer
Saturday, February 23, 2008; Page A01

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.

"I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

Several of the nation's largest lenders, along with smaller ones, are shutting off access to home equity lines in areas where home values are declining. It's an unusually aggressive move as the industry grapples with fallout from the mortgage crisis that began unfolding last year.

Now that home prices have dropped in many parts of the country, lenders are nervous that they may never collect the money that they extended to borrowers. They are responding by freezing or lowering the credit limits on home equity lines, leaving thousands of borrowers like Corazzi in the lurch.

"Nearly all the top home equity lenders I know of are doing this or considering doing this," said Joe Belew, president of the Consumer Bankers Association, which represents some of the nation's largest home equity lenders. "They are all looking at how to protect themselves as real estate values go down, and it's just not good for the borrowers to get so overextended." .....(more)

The complete piece is at: http://www.washingtonpost.com/wp-dyn/content/article/2008/02/22/AR2008022202987.html

[enid602]

1. saving

Hopefully, they're just saving her from herself.

[sinkingfeeling]

2. This is a good thing. When houses are deflating in value, it is a good business practice

not to lend money against equity. Does anybody else remember the days when you took out a second mortgage or a home improvement loan?

[Holly_Hobby]

3. Our line of credit with Chase was completely closed

We hadn't used our open home equity line of credit with Chase in more then 6 years. We opened it to replace windows and siding. Our balance was zero, but we still had it in the event of some kind of catastrophy.

We got a letter last month from Chase saying they were closing our account because homes in our area were selling for 1/3 of their value.