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by Broderick Perkins
© 2008 DeadlineNews.Com
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Deadline Newsroom - Lenders are freezing, slashing, and cutting off home equity lines of credit, but there's a growing manual of strategies you can use to avoid or mitigate what could be financially debilitating.
Maybe it's better to take the equity money and run before lenders make a move.
Lenders are only covering their assets when they reduce your home equity line of credit (HELOC), much as they are doing with credit card holders, who can also use strategies to get that credit back.
When your lender issued you the credit card-like line of credit backed by your home, chances are, your home value was much higher.
Now with shrinking values, lenders want to shake you down to reduce the chance they won't get paid should you default on your home -- which now may be worth less than the total of your outstanding mortgages.
Consider it a home equity loan meltdown as home equity stakes have been stumped.
Maybe you didn't use proper home equity protection practices.
In any event, the Federal Reserve offers the latest come-to-your-rescue tips for dealing with home equity that's been hammered.
Links throughout this story all also offer additional tips about protecting what you've got and restoring what you lost in the way of home equity credit.
• Read the notice your lender sends you. Your HELOC lender must provide you a written notice if they have frozen or reduced your HELOC. Your lender must send the notice to you no later than three business days after the freeze or reduction. The notice also must include information about any other changes to your HELOC.
• Call your lender. Even if you have a good payment record, if your home's value has fallen, your lender may freeze or reduce your HELOC. Contact your lender if you have questions or concerns about a freeze or reduction.
• Learn why your lender froze or reduced your HELOC. A freeze or reduction notice should include specific reasons for the action. The most common reasons for a HELOC freeze or reduction are, again, a decline in the value of your home, or a change in your financial circumstances.
Understanding your lender's reasoning may help if you want to take steps to have your credit line reinstated to its original amount. For example, a lender may not be aware that you made significant equity saving home improvements to help shore up the value of your home and its equity.
Or, if your financial circumstances changed for the worse and that change resulted in a lower credit score, investigate ways to rebuild your credit.
• Ask your lender how to have your HELOC reinstated. Your lender must reinstate your credit privileges when the conditions permitting the freeze or reduction no longer exist. You may need to put in writing your request to have your line of credit reinstated. Once your lender receives your written request, they must promptly investigate and determine whether your HELOC can be reinstated.
• Remember that your lender can impose fees for reinstating your HELOC. Fees include costs for an appraisal or credit report. Your lender cannot, however, charge you a fee to reinstate your credit line once the condition that caused them to freeze or reduce your HELOC no longer exists.
For more information:
• More home equity news that really hits home is available from the Deadline Newsroom.
• From DeadlineNews.Com's archival vault, still more home equity news that really hits home.
New federal consumer protections for HELOCs in the pipeline.
• Click on the keywords below for more stories on this subject.
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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop.
Perkins is also the first Examiner to cover three beats for the Examiner.com news service:
• National Offbeat News Examiner
• National Consumer News Examiner
• National Real Estate Examiner
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