HELOC suspensions

This is an astonishing move by the Mortgage Lender. The potential for arbitrary determination of home equity is disturbing. Do they also plan to increase home equity lines of credit beyond contracted levels when home values start to increase again? The lenders are obviously desperate and feel they can change the rules to suit their own needs without any thought to homeowners; they are behaving like scoundrels. The lack of regulation of these lenders is appalling.

One of my clients received this notification and was told to provide one of the following three things in writing to re-activate.

1) A CMA

2) An appraisal

3) A "broker's opinion of value"

Beacon Hill, Back Bay, South End, Brookline, Newton, Cambridge and other well placed towns should all allow for a reinstatement of any HELOC suspended for these reasons. The best thing to do is get the buyers' agent you used to make your offer and have them do a quick written CMA.

I recieved a notice from Countrywide today. I have made all payments ontime and have never missed a payment of any kind.

They value my property at $4k than what I paid for it which is 'bogus' based on a conversation with them just last week. The property is worth less than that but definitely not less than 50%.

I owe them $on my HELOC $300....Ha! Bogus company! Bogus CEO!

"The lenders are obviously desperate and feel they can change the rules to suit their own needs without any thought to homeowners"

The lenders are not changing the rules.. the rules state, in most HELOC's, that the Lender can suspend the loan at any time for numerous reasons.

I am 33 and have owned my home since I was 25. I knew that signing up for all these extra loans would not be a good idea. I had no prior experience or advise. I am not sure why people are surprised. Read the contract!

William
Cambridge

I received Countrywide's notification on January 29. With assistance from a local realtor, she provided me with a CMA that shows that property values in Boise, Idaho have not declined by 50%. The fact is the market is holding up remarkably well! Her appraisal placed value on my property at $2K more than when Countrywide purchased my HELOC in April 2007. I mailed the documentation and my request for reinstatement to Countrywide today. I've never found Countrywide to be a satisfactory company with which to do business, and will never do business with them again! I realize all of this is fallout from sub prime meltdown but I resent being sucked into the vortex after being a property owner for over 30 years!

Re – Countrywide HELOC suspension

My family and I extremely are distraught over the decision to suspend our Countrywide HELOC agreement and adversely impact my available credit and credit ratings. My family, our business and I will be significantly impacted by this decision. We called the Customer Service agent to gain a better understanding of this and express our dissatisfaction and disgust on this matter.

At the time of entering into the HELOC agreement it was our understanding the temporary suspension clause which is being used to suspend our HELOC was in the contract to make sure we took reasonable care and maintenance of our property and home. It was never explained or our understanding that “banks” were planning to issue excessive loans to developers and allow them to build excess home inventory in our market and the “banks” were issuing subprime loans to under qualified buyers and then the “banks” would be auctioning off these homes at prices below cost which would then deflate home values in the area. I believe the intended contractual purpose of this clause was to protect the bank from my actions or inactions. I do not believe the purpose of this clause was intended to allow the bank to further mitigate risk fears which are directly related to the banks own actions in contracts unrelated to mine.

Our unsigned letter from Countrywide claims our home has significantly decreased in value since the origination of the loan. I was advised by the Countrywide representative that Countrywide is unwilling to disclose or release any fact based data to substantiate this claim as it pertains to my home. The Countrywide representative advised I am obligated to prove their claim which they will not disclose or substantiate is false. They further suggested I could pay for an appraisal and inquired if I would be interested in re-working my loan (as I recall from a previous conversation they would charge about an $8000.00 dollar fee to re-work the loan).

In speaking with the Customer Service agent, I was able to verify all payments had been made on time and in full. I also explained we had recently paid down the loan principal, roughly $21,000.00 since August 2007. The reason we paid this down is we would not need these funds until spring of 2008.

The actions of Countrywide suspending my HELOC not only impact my immediate access to cash but the suspension impacts my credit scores which would impact my ability to obtain favorable interest rates… in theory Countrywide could increase profits from there action.

My family and I own and operate a small seasonal business, because business loans are not available to this business, we use our HELOC to manage seasonal cashflow and fund projects.

It is my feeling this action by Countrywide conflicts with the US Governments emergency efforts to create an economic stimulus package.

Is this worthy of a class action law suit against Countrywide and other banks engaging in this activity? I suspect the other 120,000 impacted Countrywide customers getting these letters would like to know.

Wow, the comments are quite revealing.

The American consumer has been as hooked on credit like an addict on crack. It's going to be tough for many people to start living within their means, and finally admit they don't earn enough to support the lifestyle they've been sporting. A painful withdrawal, but necessary.

The good news is that the America savings rate has finally edged into positive territory, which is better for everyone in the long run.

Here's how Banks Borrow money:
Banks place an order from the Federal Reserve in the AM of the banking day. You rush to the bank to deposit your money into your free checking by 2:00PM.
From 2:00PM to 4:30PM the bank counts your money and sends it back to the Federal Reserve, paying their principle back that very same day. Or soon after
Then they lend it to you for your mortgage.
$200,000 loan at 6% amortized over 30 years:
Principle and interest of $1199.10 - $1000.00 paid to interest and 199.10 payed to your principle. That is almost 90% interest and The government is ok with it as a matter of fact, they incentivise the transaction by offering the tax write off.
Borrowers will pay on that loan 21 years and still owe over half of what they borrowed.
Many savy heloc owners use their helocs the way banks use the Federal Reserve. They build their businesses, accelerate their morgages and build financial strength...just like the bank.

If you have a countrywide loan, refinance it if possible, if you have a countrywide
heloc, replace it. Boycott this institution. Lenders like countrywide have made us the debtor nation on the planet.

This suspension happened to us as well with no notification until they froze the account and bounced a check that we had deposited from our HELOC. I have been a mortgage loan officer/consultant in the State of Michigan for sixteen years and have never heard of this ever happening before. It is outrageous. I have no late payments either and our home has certainly not fallen in value by 50% since last summer when our most recent appraisal was completed. Sadly I am reminded that I have sold millions of dollars of good loans to this company over the years.

Several 'smart' people have missed the point of the 50% drop of the equity in the home not 50% percent in the overall value! Equity lines are based on equity after the primary mortgage. If your house is worth 250k and you owe 200k on the mortgage (first) then you have 50k in equity. If the value of the home drops to 225k (just 10 percent) then you have had a fifty percent drop in your EQUITY. This is what HELOC's and second mortgages are based on. Lack of understanding of simple concepts like this are what has so many people in jeopardy of losing their home. Just a couple of foreclosures or desperate sales in your neighborhood could justify such a drop in value, especially if you live in a over-valued neighborhood or as its called in a 'bubble' area. Get smart and pay attention, this is far from over.

Yes - I'm frozen for being 2 weeks late - I feel like an idiot because it was only $131.02 & I paid $500.00.

The rep said I was frozen for 6 mos. I'm screwed. I'm not mad @ Countrywide, but c'mon I've been w/ them for over 10 years.

My Heloc is frozen also and I have asked Countrywide to refund my loan origination fees and appraisal costs. Originally I wanted to refinance my home to include the improvements I had made (100K) but settled on a HELOC at Countrywide's sugestion for 58K. when interest on my HELOC climbed from 6% to 10.25% I paid it off. I felt like I had been baited and hooked. Now to add insult to injury they froze my HELOC. I live in an area of escalating property values. They could not have substantiating information to the contrary and they refuse to document their claims. Nor will they accept my 7 month old appraisal that shows My home value at 2 1/2 times the value of my current loan. It doesn't help to talk to a dead horse, but they still owe me.

The truly interesting thing is Countrywide is not telling the true story. the reason they are cutting off the HELOCS (including mine) is because of the way they securitized the assets. Due to poor performance of the deals the loans are in Countrywide would experience a dollar for dollar loss for any further advances they make. So to protect themselves (despite hurting a consumer) they are looking for any reason to not advance on the loans

MY BANK OF AMERICA HELOC JUST GOT SUSPENDED 3/19/2008. I HAD $9,000 LEFT ON IT OUT OF $100,000 AND THEY SUSPENDED IT DUE TO DECREASE IN MARKET VALUE OF THE HOME. OH WELL, THEY'LL BE GETTING 2 FORECLOSURES BACK SOON. THANKS BofA!

First off... you folks that think having a HELOC is irresponsible.

Second..any good attorney interested in a class action? I was told when I opened my HELOC that I would have to keep it open for 30 years or until I sold the house unless I wanted to pay a hefty fine.

Now, after more than 5 years of on time payments (yes, the life of the mortgage), I receive this in the mail that my Countrywide HELOC is suspended. It's like having a credit card with a monthly fees that can't be used anymore.

I would be very interested to know if anyone has contacted an attorney.

I agree with the comments of Kevin Nelson. The clause in the contract triggers the right to suspend only when their in fact has been a signifcant decline in the property subject to the loan. That fact cannot be established without an appraial of the subject property. A guess based on nationwide data will not do the trick. So, if they can not show an actual significant decline of the actual property in question, then they are in breech of their agreement. The only way I know of to do that is with an appraisal. The county in which we live employes appraisers to appraise the values for tax purposes. They actually adjust values every year, but the appraiser does that based on comparble sales. The increaser or decrease in valuation is always supported by comparables. When it is not, then the homeowner can complain. If they don't have the comps, they adjust downward. Countrywide has not done this.

I repeatedly asked for the basis for the conclusion for the decline in value and they said they could not show it to me. It was based on a national survey. So, they are actually bluffing.

After I got my letter I sent them an article of a recernt survey of home values in the KC Metro area. The survey showed both declines and increases. It showed that the homes in my zip code increased - 66217, that is becauce I live in a gated lake community that includes golf course sailing docks, horse stables, etc. The homes hever are selling off the chart. I sent them that artcle and a new tax appraisla showing my home increasing in value by about $30,000 above its 2007 valuation. They said I needed specific comparables. So I sent them a brokers opinion showing sales of nine properties, within 12 months of the date of the letter, three of which were within 90 days of the date. The comparables all showed square foot values increasing and that my home had increased in value based on the average per square foot sale price against the square foot area of my house shown in the appraisal. They called and said that none of the comps were relevant because none were within 200 squre feet of the square footage of my house. Half were smaller in size and half were larger, but none were plus or minus 200 sq feet of mine. Bottom line, I could not show them anything that would cause them to change their mind other than a paid appraisal, which would cost me probably another $500. I have considered getting an appraisal, but now I don't trust them.

Throughout my numerous conversations and correspondence they kept suggesting that a renegotiation of my deal would be another alternative.

Based on my conversations and experiennce, I believe they have set up an administrative structure that is designed to not reinstate the line. Their criteria for something less than an appraisal is designed such that it is almost impossible to satisfy. I have sent them two brokers letters that show a mountain of evidence inconsistent with their claim of decline in value. They have completely ignored it.

I can't imagine why BOA is buying them. What they shoud do is find a loophole in the acquistion agreement to decline to close.

I would be interested in hearing from others having a similar experience.

John Calvert

BOA is no different then Countrywide. I offered to obtain an appraisal at my own expense from a firm on thier, BOA's) list of appraisers and they stated that even if it supported my claim in terms of value, that it didn't guarantee anything. Funny thing, they will send me a credit card with a line of $20K which we all know is unsecured, but they wont free up the same amount on a secured line. I think it has something to do with the prime rate dropping, as they had no problem last year when the rates were higher and as such so were the payments. Like everyone else on this thread, we have no credit or income issues. This is just bad business and I am in the process of working with Wachovia on refinancing the BOA line. After that is completed, I will be moving all of my BOA deposit accounts, etc. to Wachovia.

We took out this line of credit as our very last attempt to pay for the costs of adopting a child. After years and years of trying, and then going through the adoption process, we were finally so close to the end. Now our line of credit has been frozen. We have never defaulted or even been late on a payment, but they said our home value declined. So after all of this, they brought much more than a home improvement project to a screeching halt. Not only can we not pay for the adoption, we were forced to pay off our car as part of qualifying for the loan. We were paying 0% financing on our car through the dealer, but now we have to pay the bank financing. We had no idea that this could happen, wish we had read the paperwork more thouroughly.

Time for a Class Action Lawsuit. This just happened to me as well. I've diligently paid down 60% of the principal on my HELOC over the last five years and am closing in on payoff. I have never once been late for my primary mortgage or my HELOC payments. AmTrust bank (formerly Ohio Savings) has just frozen my HELOC, claiming reduced property values. However, they did not arrange for an appraisal to verify this fact. Thus, I believe the bank to be in breach of contract.

IMO: the goal of the banks here is to foreclose on as many properties as possible. With a 40% decline on the dollar, perhaps banks have decided that hard assets are where they should store their money. Hence, arranged foreclosure by breach of contract. One cannot assume equal-protection under law any longer.

I too am dealing with this Countrywide issue.

The issue is not that they are suspending the credit line- they have the right to do this according to the agreement.

The issues is burden of proof. It does not state in the agreement who has to prove the decline in value. The Countrywide rep that spoke to stated that they determined my house has declined in value base on the understanding that home values have declined 5% nationwide, and that it was my responsibility (and cost) to prove that they are wrong.

Total BS

We bought our home in Islamorada Florida last year and we are trying to get a HELOC as the cheapest way (I think) to start a business. Our primary loan is with Countrywide, and we haven't had any problems with it so far. When I talked to Countrywide about a HELOC they gave me one of these generic estimates of our home value that was down to $580K from $730K a year ago. So, I decided to go to with USAA instead (much better customer service and closing costs by the way) who agreed to pay for an appraisal on our house. They came back with an even lower estimate using a not quite local appraisal company from their list of vendors. Am I better off to just pay the higher closing costs and interest rate of the bank around the corner who understands that this market is completely different than that of downtown Miami? (about $4500) What is disturbing about the change in equity (thanks for explaining that T Campbell) is that we put nearly 50% down when we bought the house.

I received a letter yesterday August 18, 08. I noticed that many of you have had your suspension on your heloc earlier on this year. I have not missed any payments on my mortgage or heloc so getting this news unexpectedly was shocking. I am in the process of selling my house 300,000 higher than the appraised value 3 years ago and they mentioned that it has declined in value. According to the representative she mentioned that the new appraised value they received on my home is based on a computerized appraisal model. I told her that the homes in my area has increased in value and I do not understand how they can generalize and make that claim.

I forsee this happening much more so, we need to prepare ourselves and become independant and free from this financial system.

Here's my theory: Just a week before suspending my HELOC, BOA raised my credit card limit to 20K. Then, took away my HELOC at 4.74%

I don't know the interest rate on the credit card (because I don't use it) - but I know it's higher than the 4.74%

They would love for me to borrow the money at a higher rate!!

Banks aggressively game the system against you. Treat a HELOC as a fixed-amount 2nd, and take the max you'll need right away, rather than trust them.

Play offense once in a while. Even if you don't see yourself headed for disaster, prepare a detailed plan for how to efficiently get yourself to the other side of a bankruptcy in the best shape possible, if it comes to that. A credible plan for leaving them holding the bag in a bankruptcy gets their attention.

BOA gave me a crazy HELOC after they bought MBNA, to encourage me to pay off my BOA and MBNA credit cards, already closed and on low-interest repayment plans. I of course put the HELOC money to better use than that. The funny part is that yanking the whole amount at once made my credit rating instantly drop a few points, and then BOA froze my HELOC against more borrowing allegedly due to the slightly reduced credit rating! Maybe they thought I'd pay their cards off, and then they'd freeze me out on the little blip that would cause, but I already had 100% of the HELOC money.

Call me irresponsible, but BOA was the instigator. When they advised taking a HELOC to pay off their credit cards, I said nobody would give me a HELOC due to my debt/credit ratios and my large neg-am 1st. They said, no problem, we'll give you a HELOC ourselves. The balance on my 1st was already way above the original loan amount but still $51K below the amount it was capped at, where the payment skyrockets to positive-am. BOA gave the HELOC for $appraisal - $balance, rather than $appraisal - $cap. If values held steady, the HELOC would be $51K underwater when the 1st resets: the most likely time for both loans to go bad. It's not as if I hid it from them. The cap was recorded at the registry of deeds on my 1st, as was the fact that it was neg-am and the original 1st amount was well below my balance. I paid them a title search fee, so there is no doubt they saw it. They clearly hoped I would use it to pay off their credit cards, but I never said I would.

The HELOC is now entirely underwater, and my 1st (now held by the FDIC, sort of...) is also somewhat underwater before even considering selling costs. Maybe they'll both make me an offer I can't refuse, maybe a government bailout will subsidize them to do so, or maybe I'll just hand them the keys and see whether or not it makes sense to file bankruptcy when the smoke clears.

In my case, foreclosure with or without filing bankruptcy afterwards, is far better financially than staying in the house, unless they forgive (and I do not mean postpone and still make due on sale) the entire current amount of negative equity above the expected net proceeds of selling it. They were betting on rising real estate values every bit as much as I was. Whatever happens, I'll feel enough pain that I won't feel guilty about letting a bank or two take a big hit alongside me.

The banks, the government, and bankruptcy laws set the rules of the game. Banks don't mind bleeding us when we have money, and kicking us when we're down and almost broke. Don't be afraid to do the same to them while they're overwhelmed by our sheer numbers and the size of their own problems at the moment.