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

Bloomberg reports:

“Late payments on home-equity loans rose to a record in 2008’s fourth quarter as job losses and the deepening recession put a strain on borrowers, the American Bankers Association reported. Delinquencies increased to 3.03 percent of accounts in the period from 2.63 percent in the third quarter, the Washington- based group said today in a statement.”

The massive number of HELOC delinquencies has caused lenders to tighten requirements for new borrowers and even freeze the lines of current customers. Will a turn-around be reported for the first quarter of the year?

See Also:

HELOC Freeze

HELOC Foreclosure

HELOC Q & A

The American Chronicle reports:

“Today, rates for more than half of all cardholders have skyrocketed while interest rates are at their lowest levels in history. At the same time, mostly for very little reasons, credit limits keep being cut…

If you have a low-rate card, you will likely be “blackmailed” into choosing an increased 5% payment or a higher rate at your current payment. Card issuers want to get rid of you and your low rate. If possible, take the higher payment and keep the cool rate.”

HELOC borrowers have faced some of the same problems in the form of line reductions. But, in general, HELOC lenders are not able to change the terms of the line through raising the minimum payment.

Many people who already  have a HELOC are choosing to stick with it, and are sometimes withdrawing funds early to protect against line cuts. But, if you’re still looking for a way to borrow money, you may want to take out a home equity loan rather than a HELOC (home equity line of credit) or another type of loan. Home equity loans tend to have higher fees than HELOCs, but borrowers are safe from unexpected linen cuts.

See Also:

Home Equity Loan vs. Home Equity Line of Credit

Is a HELOC Right for You?

However, unlike second mortgage loans, HELOCs have rates that can adjust upward.

Reuters reports:

“Home equity lines of credit (HELOC) currently are charging rates as low as 3.5 percent; they are cheaper than regular mortgages now. But that may not last. Borrowers will have to make their best guess in predicting whether they will be able to pay off their HELOCs before rates rise to mortgage-topping levels. If you’re looking at a very large balance on a HELOC and are uncertain about when — if ever — you will be able to pay it off, consider rolling it into a new mortgage along with your existing loan.”

When taking out an equity loan, borrowers have to ask themselves if they want have the rock-bottom HELOC rates or the rate security of a fixed-interest second mortgage.

See Also:

Is a HELOC Right for You?

Home Equity Loan vs. Home Equity Line of Credit

However, now that banks are freezing home equity lines, some borrowers may feel safer taking out a home equity loan. These loans disburse a flat sum of money and are unlikely to be called due. Although home equity loans tend to have more expensive closing costs, the peace of mind may be worth it.

For a more extensive comparison of these two options see: Home Equity Loan vs. Home Equity Line of Credit

If you’re trying to decide how to borrow, take a look at this chart illustrating the most important differences between home equity loans and home equity lines of credit.

“Rates are at their lowest levels in over 3 Years — there’s never been a better time to apply.”

That may be true for borrowers who have excellent credit, hold significant equity, and live in areas with stable home values. But, I’m afraid those who don’t meet these requirements won’t get the lowest rates in three years. They’ll be lucky if they can find a HELOC lender offering a loan with any rate.

For those who do meet the new, more stringent guidelines, there are some benefits to taking out a HELOC now. In addition to low rates, Wells Fargo is offering loans with no bank closing fees and a quarter point rate discount for customers making automatic payments.

See Also:

The Best HELOC Lenders Ranked

Here’s the catch: the borrower must agree to pay back the money borrowed plus half of the home’s appreciation value between the time they entered into the agreement and the date of sale.

A Reuters article explains:

“Under the Rex Agreement, a homeowner with a $500,000 house can get $71,429 now in exchange for a 50/50 split on the home’s appreciation (or depreciation) going forward. Over the last 20 years, single-family home prices have gone up 6.5 percent a year, according to industry data compiled by data360.org. If the home appreciates 6.5 percent a year for 10 years, that means that in 2018, the home would be worth $938,568. The homeowner would owe Rex $71,429 plus $219,284, half of the appreciation, for a total of $290,713. If, instead, the homeowner borrowed $71,429 at 10 percent interest — higher than the current going rate for second mortgages for good credit risks — he would end up paying $41,844 in interest, for a grand total of $113,273.

Why the huge disparity? Part of it is because these figures don’t account for the time value of money; that the homeowner would be paying off that loan over 10 years and not at the end of 10 years. But most of it is because the shared appreciation agreement effectively leverages the issuer’s money: They’re giving the homeowner roughly 14 percent of the home’s value and getting appreciation on 50 percent of its value. In effect, though the deal isn’t structured as a loan, they are “lending” $71,429 but getting an expected 6.5 percent interest on $250,000.”

When you put it that way, it doesn’t seem like such a great deal.

On the flip side, many of these shared equity agreements benefit the borrower if his home equity declines at the time of sale. Should the property decline in value, the lender will pay for half of the loss. That’s a feature many HELOC borrower probably wish they had at this point.

See Also:

Is a HELOC Right for You?

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

“Despite an economy affected by a stagnant housing market, decreasing home values and upheaval among lenders, overall customer satisfaction with the home equity line of credit/loan origination process has improved since 2007, according to the J.D. Power and Associates 2008 Home Equity Line/Loan Origination Study(SM) released today. Overall customer satisfaction in 2008 averages 780 on a 1,000-point scale, increasing by 14 points from 766 in 2007.”

Why the increase? It could be that customers are given more attention despite the recent lending problems. Or, perhaps more likely, prospective borrowers are so happy that they’re even able to take out a HELOC in today’s market that they overlook the details. Despite the many HELOC problems borrowers have dealt with this year, it is true that these customers have extremely low interest rates.

Major HELOC lenders showing the greatest customer satisfaction include Bank of America, Suntrust, and Wachovia.

See Also:

HELOC Rates Go Down, Home Equity Loan Rates Go Up

Negotiating HELOC Rates and Terms