The New York Times reports:

“The Fed said in a statement that, because of weakening economic activity, it had cut the Federal funds target rate by half a percentage point, to 1.5 percent. It also cut its discount rate by the same amount. The vote was unanimous…

Federal Reserve officials said Wednesday’s action was the first time ever that the Fed had coordinated a reduction in interest rates with other central banks, though the United States has periodically joined with other countries to intervene in currency markets to stabilize foreign exchange rates.”

Major banks including National City, Wells Fargo, and Wachovia followed suit by lowering their prime lending rates to 4.5%. The prime rate is the rate that is given to the most credit worthy borrowers.

For more information on how this may affect you see: Will Federal Rate Cuts Affect Your HELOC APR?

Now it’s  looking like only a handful of major HELOC lenders will come out of this. The next time you go to take out a home equity line of credit, you may have to choose from five massive lenders rather than twenty or so.

Just recently, MarketWatch reported that Wachovia is in serious negotiations with Wells Fargo. They explain:

“Wachovia Corp. was in advanced discussions over the weekend to sell itself to Wells Fargo & Co.

The Wall Street Journal reported Monday, citing a person familiar with the situation. Wachovia also held talks with Citigroup but by late Sunday Wells Fargo appeared to be the preferred bidder…”

What happens with these banks and the proposed bailout is yet to be seen. However, it is clear that a massive consolidation process is taking place between the nations largest banks.

See Also: 

Who’s to Blame for the Home Equity Crisis?

New WaMu CEO Faces $60 Billion in Home Equity Loans

The Philadelphia Inquirer explains:

“Wachovia credit-line customers whose home equity has declined 50 percent or more received letters in the last several weeks saying that their credit lines had been reduced or blocked, Wachovia spokeswoman Barbara Nate said.

“Our rationale is that we don’t want customers to get in a situation where they can’t afford their outstanding commitment,” Nate said.”

You have to admit, 50% is a huge drop in equity. Homeowners experiencing that kind of decline may have more to worry about that accessing their HELOCs.

See Also:

Wachovia to Freeze HELOCs

The Best HELOC Lenders Ranked

“Wachovia Corp. said on Monday that it’s limiting homeowners’ ability to tap home equity lines of credit that they haven’t used yet as the giant bank tries to cut its exposure to the broadening housing crisis.

Other mortgage lenders, including Washington Mutual, Countrywide Financial, and Indymac Bancorp, have also been cutting home equity lines aggressively, Fred Cannon, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors on Monday.”

HELOC freezes and cancellations have been happening since January and show no sign of stopping. Your lender may choose to freeze your line even if you’ve paid every bill on time and have otherwise fulfilled your obligations as a borrower. If you plan on using your HELOC this year, you may want to withdraw money now to avoid being surprised by an unexpected line freeze.

See also:

Strategic Withdrawals to Avoid the HELOC Freeze

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