For months, HELOC borrowers have been complaining about frozen and reduced home equity lines. Now, a concerned congressman is asking lenders some tough questions.

Representative Dennis Kucinich called the HELOC freezes “very disturbing.”

“People have had their home equity lines suspended whether or not their credit is good or not, and whether they have sufficient equity in their houses, or not,” he said. “As Chairman of an investigative subcommittee in Congress, I can get answers from the banks.”

The Domestic Policy Subcommittee sent letters to nine major lenders including AmTrust, Keycorp, National City Bank, Charter One Bank, Wells Fargo, Fifth Third Bank, Huntington National Bank, CitiFinancial and JPMorgan Chase Bank. They may send additional letters to other lenders.

The letters ask some tough questions such as:

“If your institution has already notified borrowers of your intent to restrict HELOCs, what were the criteria you used to identify recipients of that notification? How many borrowers received such notifications, and where were these borrowers located, by zip code? Please also provide a copy of the notification and any attachments. What is the nature of the restriction?”

If your institution has initiated or is considering a restriction in home equity lines of credit, tell us what basis for assessing housing values of your borrowers are you using specifically for the purpose of evaluating HELOCs? If this is a proprietary source, please explain the methodology and the name of the vendor

What other loan products has your institution restricted, or is your institution considering restricting, and what steps, if any, has your institution taken in this regard?”

Since most HELOC loan documents include language that allows for limit reductions, it is unlikely that the sub-committee will uncover evidence of illegal actions. However, it will be interesting to see what information lenders release. Up until now, HELOC freeze statistics and methods have not been widely available.

See Also:

HELOC Lenders - More Unpredictable Than Ever

List of Lenders Sending HELOC Freeze Letters

Tags | Countrywide, Heloc, heloc freeze, HELOC Lenders, lenders, National City Bank, Wells Fargo