Frozen helocs

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Frozen helocs

Minna Reid
Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 633 votes

So today I go to get some cash out of my heloc. Guess not! It seems citibank has decided my house isnt worth what it used to be and my heloc is now suspended. You'd think these people would have at least sent me a letter or something. Furthermore when I called they told me they decided my house has dropped 30% of its value in the last few months. Now I know theres a lot of gloom and doom being touted out there but thats just ridiculous. I know for a fact that my house has not dropped 30% and my local market is doing alright, but trying to fight the bank...well, I'm not feeling like taking on the aggravation right now.
However, it did get me thinking just how all this affects the marketplace. It seems a lot of banks are freezing helocs everywhere. That leaves people with even less cash and capital (and by surprise, no less), especially those of us who use helocs to further our business ventures. I really believe most of the hoopla is brought about and perpetuated by pure media frenzy. Now yes values have declined. The market did need a dose of reality, but the craziness that is being touted by all the media outlets, just scares people and further slows the economy. IMO, anyway.

Now the true cash buyers of the world....well I would guess those folks are sitting real pretty right now.

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Toby Munk
Residential Real Estate Broker · Aspen, CO · Member since 2008 · 155 posts · 4 votes
18y

This should cause an effect that was probably not intended by the mortgage providers. A RUN FOR THE BANK.

Anybody that has a line of credit that is not used and still available would do good in drawing on the line and depositing in a savings account. Costs money but keeps it available when you need it.

I guess cost of capital has just gone up if you want to make sure you can get to it when you need it.

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  • Christian Malesic
    Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
    18y

    heloc?

    Please advise. What is this?

    From your context, my best guess is that it some sort of line of credit (LOC).

    That said, it does not make sense that they would freeze it if you are a good client and paying on time. MY LOC is backed by my good name and financial statements submitted a minimum of annually as well as my experience with the bank.

    They do have paperwork, previously signed, giving them my personal guarantee, rights to receivables, assignment of rents, first born male child, and right to my body parts upon passing.

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  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 633 votes
    18y

    Home equity line of credit. Sorry for the confusion.
    And I have perfect credit and have never even had one late payment. I've been an excellent customer. What they tell me is that theyre suspending anyone who they feel no longer (based on home value declines) meets their equity criteria. They may turn it back on if the market recovers. I can get an appraisal and try to appeal if I'd like. According to their rep.
    So upon doing a little homework, it seems a lot of banks are doing this. Regardless of balance, payment history, whatever.

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  • Jon Holdman
    Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
    18y

    HELOC = Home Equity Line of Credit. A second (or whatever) mortgage structured as a line of credit instead of a lump sum loan.

    I've heard these are being frozen in some cases. I'll bet somewhere buried in the terms is a statement they're allowed to take this action if they believe the value has fallen.

    I guess this is sort of a problem of our own making. When doing a short sale where there is a first and a second, the seconds really get crushed. Doesn't at all surprise me the banks are trying to reduce their risk.

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  • Kyle Gregory
    Real Estate Investor · liberty township, OH · Member since 2008 · 149 posts · 6 votes
    18y

    i am surprised it to HELOC's this long to freeze.... and i am laying bets that the housing market will take a turn for the better soon after the election this year.. Seems the knuckleheads in DC think they need their greedy hands in the pot and making the housing market a bigger issue than it should be.

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  • Christian Malesic
    Real Estate Investor · Harrisburg, PA · Member since 2008 · 716 posts · 41 votes
    18y

    Do you have a business entity in which you can get an LOC? Our LOCs are Business LOCs. I guess that is the big difference, which is why we are not running into the same freezing thing (…as of yet. Fingers crossed).

    If I am understanding, your HELOC is on your primary residence, correct?

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  • Minna Reid
    OP
    Real Estate Broker · Jacksonville FL & Middletown, CT · Member since 2008 · 1k+ posts · 633 votes
    18y

    yeah my primary residence. Too bad too cause the rate was fantastic. It was my easiest cheapest source of cash. I have an LLC also though it has not been established long enough to really get a good LOC. Another year or so.
    I guess I'm not really surprised, just irritated. maybe a little offended. I mean I've always felt that the banks shouldve reigned in the crazy lending long ago, and pitied those poor folks stuck in those crazy mortgages...etc...just never thought it would turn on me. I've always been such a responsible borrower and when she told me I was suspended I thought "huh? Me? are you serious?" Maybe I was ridiculous to expect that the status quo wouldn't affect those of us that never contributed to it.
    Either way if you have a heloc at anywhere near 100% I wouldnt make a lot of plans for it. Or pull it while you can. I wish I did.

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  • Michael Shadow
    Investor · Bellefonte, PA · Member since 2008 · 1k+ posts · 88 votes
    18y

    Now you got my wheels turning. My HELOC rate is awesome too however mine is held at a local bank so they know that the market in my area is not in s slump. However because the rates are so low maybe that would be a good reason for them to freeze it. My HELOC rates are coming in at 1-2% better than the mortgages I'm getting right now. Emigrantdirect was paying me more to save money with them 2 years ago than I am paying my bank right now on my HELOC.

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  • Toby Munk
    Residential Real Estate Broker · Aspen, CO · Member since 2008 · 155 posts · 4 votes
    18y

    Got a letter from Countrywide about 4 weeks ago. Same thing. HELOC frozen.

    I called and they stated that in the fine print they could do that if the home values fall.

    Well my home is worth about 2x what I owe on it and prices here in Aspen have not budged at all.

    So I think they sent the letter out to everybody as they are running out of cash.

    They stated that I could send them a BPO to get the freeze lifted. Since I am maxed on the HELOC no need to do that right now ;-)

    But since I am an agent I should do the BPO and show them the facts.

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  • Marzia Polito
    Burbank, CA · Member since 2008 · 1 post · 0 votes
    18y

    Citibank did the same to me: decrease equity line, with no backing documents that the property actually decrease that much (which is not true). They claim to have used a computer-estimate.

    Here is the real problem: on the contract they talk about appraised value, and they did not do an appraisal!

    I am exploring possibilities for lawsuit or class action: anybody wants to join?
    M.

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  • Richard Warren
    Real Estate Investor · Las Vegas, NV · Member since 2008 · 1k+ posts · 447 votes
    18y

    Washington Mutual reduced my HELOC. They sent a letter stating that due to declining property values in my area they were reducing it by $100k. They didn't freeze it. I have sufficient equity to justify the amount of the credit line, but the reduction was something that they are doing across the board in my area. I did call them and I was told that I could reapply but I would have to pay for a new appraisal. I haven't decided what to do as of yet.

    I can’t say that I blame the banks. The HELOCs are based on the amount of equity in the home and there would be less equity with home values falling. The contract clearly states that they have the right to do this, so a lawsuit would be a waste of time.

    8)

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  • Toby Munk
    Residential Real Estate Broker · Aspen, CO · Member since 2008 · 155 posts · 4 votes
    18y

    This should cause an effect that was probably not intended by the mortgage providers. A RUN FOR THE BANK.

    Anybody that has a line of credit that is not used and still available would do good in drawing on the line and depositing in a savings account. Costs money but keeps it available when you need it.

    I guess cost of capital has just gone up if you want to make sure you can get to it when you need it.

    1Reply
  • Grant Cagann
    Banker · Scottsdale, AZ · Member since 2008 · 17 posts · 0 votes
    18y

    this happened to a friend of mine this morning. he called me after he got off the phone with FNBA. it seems that they received his payment on the 3rd (instead of the 1st), and due to the "late" payment the account was frozen.

    ...and yes he later found it in his fine print that if the payment was received w/in the 15 day "grace period" they have the option to freeze it...and raise the rate :shock:

    0Reply
  • Mark Key
    Residential Lender · Los Angeles, CA · Member since 2008 · 57 posts · 0 votes
    18y
    Originally posted by "Heathen":
    heloc?

    Please advise. What is this?

    From your context, my best guess is that it some sort of line of credit (LOC).

    That said, it does not make sense that they would freeze it if you are a good client and paying on time. MY LOC is backed by my good name and financial statements submitted a minimum of annually as well as my experience with the bank.

    They do have paperwork, previously signed, giving them my personal guarantee, rights to receivables, assignment of rents, first born male child, and right to my body parts upon passing.

    WHAT HE MEANS IS WITH VALUES DOWN THERES TALK ABOUT THAT THERES NO EQUITY TO TAP INTO ON A LOC
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