Thursday, September 4, 2008

Cash for Closing Equity Lines

Here is a story we have heard before - a lender offering cash to close an equity line. This article from CNN Money titled National City Offers Customers Cash to Cut Equity Lines illustrates another example. Lets take a look -

National City Corp. , which is among the U.S. banks hit hardest by the subprime crisis, is trying to reduce its exposure to some home loans by offering customers cash to close their untapped home equity lines, the Financial Times reported.

The bank is offering to waive closure fees and write customers a $200 check to close "open-ended" home equity lines - which are committed but as yet undrawn - the FT reported on its Web site late Wednesday, citing National City.

The program in essence buys back the borrower's right to access the line and reduces the bank's exposure to lending money against houses that have fallen in value, the FT said.

Actually this seems like a smart way of handling a difficult situation. They are giving money to people who had probably had no intention of using the funds. They are not just closing lines recklessly - opening themselves up to future lawsuits and angry customers.

We have to give National City a thumbs up for handling the situation in such a professional and well thought out manner. Hopefully other lenders follow-up their lead rather than just more cutting across the board.

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