Lenders don’t give any warning before freezing a home equity line of credit. Telling their customers ahead of time would defeat the purpose, since many would max out their lines if given advance warning.

This policy has led to major trouble for some HELOC borrowers - namely those who have recently written HELOC checks or planned to use their line when they are hit with a freeze.

In some cases, costly home remodeling projects have been well underway when the homeowner is suddenly stuck without the means to pay for the improvements.  Fortunately, some lenders have shown sympathy to these situations.

Several major HELOC banks, including Countrywide, will reconsider a freeze in extenuating circumstances.  Kiplinger reports:

“Countrywide’s letters advised borrowers who had outstanding checks to contact the company to discuss how they would be handled. Borrowers who had planned to use their line of credit for a major expense within the month were told that Countrywide would try to work with them. Homeowners in the midst of major home-renovation projects were asked for signed statements from their contractors. Washington Mutual spokeswoman Sara Gaugl said that her company, too, would “continue to assist customers who may have unique or special situations.”

If you find yourself in such a circumstance, call your HELOC lender immediately. It can’t hurt to ask.

See Also:

FDIC Warns Lenders on HELOC Freezes

Can a Frozen HELOC be Thawed?

Tags | Heloc, heloc crisis, heloc freeze, home equity line of credit, mortgage crisis