Saturday, October 11, 2008

Fighting the HELOC Shutdown

Lenders are trying to reign in HELOCs. Closing down lines completely and abruptly are constant stories. In this article from KABC Television in Los Angeles regarding how to get help if a equity line is cut. The story starts out with a woman named Frances, a realtor not making any commission that is filing for bankruptcy since her HELOC is frozen. Take a look -

Frances is just one of millions of homeowners all across the country, and all across income levels, who has seen her home values drop and slice into her home equity. Greg McBride is a senior financial analyst with He says this new policy by lenders and banks is happening everywhere.

"You may have had a line of credit approved for $100,000, back when you actually had $100,000 of equity in the home. Due to falling home prices, you no longer have that $100,000 in available credit. Therefore, the lender certainly doesn't want to be on the hook for it," said McBride.

James Burns is an attorney who usually handles loan modifications, but he's now doing more business with people having HELOC problems. He says a lot of decisions made by banks don't make sense.

"There's no definition on what's a significant decline. And, that's the term. And only the fed has said that's about 50 percent ... and most people aren't 50 percent," said Burns. "So, I think there's a lot of argument there."

Both James and Greg say homeowners with good credit can fight back.

"A lot of times it's just picking up the phone and requesting to have it reinstated. And, what we've seen in a couple of clients' instances is that they've called and it was reinstated," said Burns.

Note - there is a video at the link about the report. If we can figure out how to embed it we will.

Imagine that - just calling and for the line back and it works. That should be the first thing that anyone does. Then one has to figure out if they want/need to fight it or just let it go. It is a good time to really think about one's situation.

Frances the realtor should be re-evaluating her life and her career options. She seems to still be under the illusion that she can bounce back and the housing market will be what it once was. Like all who work in industries in decline, now is the time for her to look to her future. She should be looking for a recession proof job rather than clinging to a dinosaur industry. They may not pay as well but they can keep a roof over ones head and feed and clothe the family.

The Great Housing Bubble has burst and we are in a ditch.

Now is the time to decide if you want to get out of the debt ditch or keep digging.

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