A recent release from his office explains:

“…Mike Haridopolos today called for hearings in Tallassee to investigate claims that after banks received hundreds of billions in federal bailout money they squeezed consumers and fraudulently or arbitrarily reduced Home Equity Lines of Credit (HELOC) to improve their own bottom lines.

‘I have heard the stories of this happening across our state and our country, and the courts are filled with lawsuits,’ says Haridopolos (R-Merritt Island). ‘This needs to be investigated because if true it’s outrageous. The very banks that are bailed out with taxpayers’ money then stick it to homeowners?’

Haridopolos is calling for hearings in Florida and is also asking that Congress investigate the claims of wrongful HELOC suspensions.

See Also:

How to Protect Your Credit in Case of a HELOC Freeze

Courthouse News Service reports:

“Yakas filed a class action, alleging breach of contract and unjust enrichment. She said Chase breached the HELOC in three ways: by failing to obtain an appraisal by a licensed appraiser, by using the unreliable AVM to assess her property value and by charging her a $20 annual fee after it suspended her credit line.”

It’s about time that someone stood up for HELOC borrowers’ rights. Lenders can certainly limit or even freeze HELOC lines if there is not sufficient equity remaining in a property. However, it is unfair to freeze HELOCs in batches or based on these so-called “automated valuations” that do not require any actual appraisals or personal considerations.

photo credit: The-Lane-Team

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HELOC Freeze Help

But, 2010 may be the year that frozen HELOCs begin to thaw.

PBS’ Nightly Business Report explains:

“As housing prices and the economy begin to stabilize, many lenders are writing lines again. They’re not the unbelievable deals they used to be, but they can still be a relatively cheap way to borrow. For example, it can be wise to pay for a new car with funds from a HELOC, since some auto loans charge far higher interest rates than HELOCS do.”

If your area wasn’t hit too hard with the real estate downturn or if you hold a significant amount of equity due to paying down your mortgage, you may be able to qualify for a low-interest HELOC. Give it a try…even if it didn’t look so promising last year.

See Also:

How to Qualify for a HELOC

Is February the perfect time to cut ties with big banks and look for a better match?

The Consumerist reports:

“You deserve a healthy relationship with a bank that values you as a customer, instead of jacking up interest rates, cutting your HELOC and your credit card, and refusing to adjust wacked-out mortgages.”

Big banks aren’t always bad. But, recent financial troubles have caused many financial organizations to make sweeping changes that affect everyone – both the responsible HELOC borrowers and the not-so-responsible borrowers. Many HELOC lines have been cut or frozen without personal consideration.

Local banks and credit unions may not always be better. But, at least customers have a good chance of talking face-to-face with someone who can consider their individual situation.

photo credit: joanna8555

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Negotiating HELOC Terms

When a homeowner applies to refinance a property, he must first get permission from the second lien holder (i.e. the HELOC lender). In the past permission was taken for granted. But, due to troubled economic times, more banks are refusing permission or making additional requirements for borrowers.

ScrippsNews explains:

“A bank’s refusal to resubordinate can be costly to the homeowner. Caleb Shaffer has two mortgages on his duplex in Oakland, Calif. Both loans are with SunTrust. A credit union offered to refinance the primary mortgage at a lower rate, saving roughly $250 to $300 a month. Shaffer says he couldn’t go through with the refinance because SunTrust refused to resubordinate the second mortgage. SunTrust has received $5 billion in TARP funds from the federal government, or $34.13 for every working American.

Shaffer says he was told that he could refinance with SunTrust, but not with another lender. “They’re saying their policy is they don’t subordinate unless it’s within the family of SunTrust,” he says.”

If your HELOC lender is enforcing such policies, your refinancing options may be severely limited. If you’re considering refinancing in the future, think about applying now before more HELOC lenders adopt this method of securing your business indefinitely.

See Also:

Some HELOC Lenders Prohibiting First Mortgage Refinances

HELOC Freeze Help

NewsDay does a good job of explaining just what these design standards entail:

“Universal design is a concept that promotes accessibility, safety and ease of use, especially for older or disabled residents. Features range from nonslip flooring to rollout drawers and step-free entrances.

“There’s an increasing aging population of baby boomers and an aging population in general,” said Judy Pannullo, executive director for the Suffolk Community Council, a Hauppauge-based nonprofit. “That tells us there’s a need for universal design.”

Most home equity lines of credit can be used any way the borrower desires. But, some lenders feel that specified-use HELOCs are a smart way to promote a cause and help homeowners be more responsible with the money they borrow. (Sorry, there’s no using this line for a down payment on a sports car…)

photo credit: John Flinchbaugh

See Also:

5 Financially Sound Ways to Use a HELOC

How a HELOC Works

“BasePoint Analytics(TM), a leading provider of scientific fraud and risk analytic scoring solutions, today announced the availability of FraudMark(R) for Home Equity, the industry’s only fraud detection solution designed to address the home equity market, enabling lenders to fund loans with confidence…

The FraudMark for Home Equity solution applies BasePoint’s proven pattern recognition analytics to new loan applications, enabling lenders to focus investigation on the most risky applications before spending resources for underwriting and external verifications.”

This program may help lenders avoid awarding bad home equity lines in the future. However, it seems that the current problem of poor performing home equity portfolios has more to do with lax lending standards and dishonest brokers rather than borrowers trying to trick the system.

See Also:

Is a HELOC Right for You?

How to Qualify for a HELOC

HELOC Loan-to-Value Ratio Requirements Get Tough

“The banking subsidiary of National City Corp has signed a confidential memorandum of understanding with U.S. regulators, promising to address its rising amount of bad loans, a source familiar with the matter said on Monday.

The memorandum signed by the bank and the Office of the Comptroller of the Currency requires the bank to improve what examiners see as potential problem areas.”

If National City does not improve, it may become subject to formal sanctions.

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The Best (and Worst) HELOC Lenders Ranked

Answers to Common HELOC Questions

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.

See Also:

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.

See Also:

HELOC Lenders – More Unpredictable Than Ever

List of Lenders Sending HELOC Freeze Letters