NY Daily News reports:

“Looking to get a loan for school? A car? A house? Fat chance.

Billions of dollars have flowed into bank vaults, but billions of dollars are not flowing out, at least not to borrowers — at least not yet.

Most banks are making fewer loans and employing stricter standards on borrowers than they did a year ago, despite the multi-billion dollar bailout of the financial industry.”

On the positive side, many major lenders such as Countrywide are continuing to advertise for new HELOC customers. Most lenders only want the best-of-the-best, but they’re willing to put some money in to find these credit worthy clients.

photo credit: TheTruthAbout…

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Banks are getting less selective about who they choose and are now cutting off access for people with good payment histories and existing equity. In today’s market, lenders are freezing HELOCs just because the borrower’s property is in an area with declining values.

Check out the Consumerist article for a look at an actual HELOC freeze letter. Or, if you already have one of your own, take a look at this list of actions to take if your HELOC is frozen.

Here are the results, on a scale of one to one-thousand:

Bank of America: 811
SunTrust: 809
Wachovia: 807
Chase: 791
Industry Average: 780
WaMu/Washington Mutual: 773
CitiMortgage/Citibank: 762
National City Bank: 756
Wells Fargo: 755
Countrywide Home Loans: 728

Bank of America takes the lead, two points ahead of SunTrust. Quite a bit below the industry average trails Countrywide, a whopping eighty three points behind.

You can’t learn everything about a HELOC lender from a survey like this, but it does provide an excellent starting point.

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HELOC Customer Satisfaction Increases in 2008

Lenders Sending HELOC Freeze Letters

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.

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HELOC Lenders – More Unpredictable Than Ever

List of Lenders Sending HELOC Freeze Letters

“Homeowners’ pain is acute in Las Vegas, where property values soared 50 percent or more during 2004 and 2005 and since have plummeted. Las Vegas housing prices declined 23 percent in February, leading 20 U.S. cities tracked by the S&P/Case-Shiller Home Price Indices. Nevada had the highest U.S. foreclosure rate in March: one of every 139 households…

Amid flashing neon signs along the Vegas Strip, residents are losing access to credit that might have financed businesses or bought cars and other goods.

As many as 15,000 people in Las Vegas, or 5 percent of the total homeowner population, had credit lines suspended by Countrywide and other lenders, said Brad Henderson, president of Henderson, Nevada-based mortgage banker and broker Evofi One.”

5% of the population losing access to their HELOC lines is no small deal. Unfortunately, many of these people were probably relying on their HELOCs to be a safety net during financial trouble. Now that financial trouble is here, that doesn’t seem like the most reliable financial planning method.

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What to Do if You’re Hit by the HELOC Freeze

Countrywide HELOC Loans 

Countrywide HELOC Basics

Lender Type : major bank

Website : www.countrywide.com/equity

Phone Number: 1-800-763-1054

Countrywide HELOC Loan Programs

There are several options available to Countrywide HELOC customers.

The basic Countrywide home equity line of credit offers a 5-10 year draw period, with an option to renew. During the draw period, the borrower is able to make minimum monthly payments of interest only. The repayment period is fifteen years. Customers can generally borrow up to 90% of their homes’ value.

The Countrywide Super Streamline Home Equity Line of Credit is an express HELOC designed for recent Countrywide mortgage customers. Borrowers who have recently taken out a home loan with Countrywide can get a HELOC based on the paperwork they previously submitted. This option is only available to people whose jobs and financial status have not dramatically changed since the original loan documents were filed. Aside from the paperwork issue, the terms are generally the same as Countrywide’s basic HELOC.

In addition to these two HELOC programs, Countrywide offers a lump-sum home equity loan. A borrower can take out as much as $500,000 based on the equity in his home. Countrywide home equity loans have fixed interest rates, although some interest-only repayment options are available.

Countrywide HELOC Loan Requirements

As with most HELOC lenders, Countrywide loan standards have tightened in 2007/2008. See: How to Qualify for a HELOC.

Information about the Countrywide HELOC Freeze

In early 2008, Countrywide led the national HELOC freeze by sending out over 100,000 freeze notices to borrowers. Due to a decline in home equity, these borrowers were told that they no longer have the option to draw on their existing HELOCs.

HELOC letter recipients were reportedly chosen by an algorithm examining home values. The letters were not the result of borrowers’ late payments or other situations.

Although it significantly more difficult to take out a HELOC with Countrywide now, it is still possible. Countrywide is still advertising their HELOCs and giving out lines to people who have not maxed out their equity or living in sharply declining markets.

See Also:

How to Get the Best HELOC Rates and Terms

HELOC Lending Standards Tighten