<p>I have HELOC from Wamu and I have not received any letter yet. I have never tapped the credit line either and don’t plan to.
If my HELOC is frozen I would borrow against my 401K next, that’s if I did not have the 529 savings or other savings.</p>
<p>Reply to Pete0six - </p>
<p>We did contact our lender. The reason the lender gave for freezing my HELOC was that their AVM method indicated that my home’s value had declined significantly since the loan was originated 3.5 years ago.</p>
<p>Odd, because our local area is not experiencing a decline and the home across the street (similar to our home) recently sold for about 20% more than our home was valued at for the HELOC 3.5 years ago.</p>
<p>Our first mortgage is a fixed 5% APR loan for 40% of what our home was valued at 3.5 years ago, so no reset there.</p>
<p>What is also strange is that this same HELOC lender sent another letter a few days later offering us an ‘exclusive discount’ to refinance the mortgage we have through another lender with them because of our outstanding credit record, offering an interest rate lower than the 5% we’re paying now and no costs and fees. They claim that this offer is not available to the general public.</p>
<p>As to the mortgage broker I chatted with - he said that a few weeks ago, the calls they were getting about frozen HELOCs were coming from clients who were having financial and credit score problems. But more recently, the freezes have been hitting clients that had none of the typical markers that lenders had been using to make the decision to freeze. In most cases, lenders are claiming significant declines in property values, even though our area isn’t declining.</p>
<p>If HELOCs are not available, PLUS loans can be a good option.</p>
<p>
</p>
<p>The fine print almost always includes language that allows HELOC lenders to reduce or limit the borrower’s access to funds if the property used to secure the loan has declined in value.</p>
<p>The HELOC lenders are freezing the HELOCs, not closing them. The freeze means that no (or no further) money can be drawn from the loan.</p>
<p>What appears to be happening is that lenders are blanketing borrowers with the general ‘decline in value’ excuse to avoid lending out any more money. </p>
<p>We, or anyone else whose HELOC has been frozen for only the ‘decline in value’ reason, can appeal the freeze by providing rebuttal documentation including a current appraisal. </p>
<p>We could unfreeze this if we wanted to, but the fact that this is happening to people in areas that are not experiencing a soft market or declines in value indicates that the lenders believe that the housing market and the economy are going to get much worse than they are now.</p>
<p>More people are reporting problems with frozen HELOCs.</p>
<p>Linda P. Taylor’s January 30th blog:</p>
<p>“Just got a call from one of my college funding team who is an expert in home loans. She was notified by several large lenders that they have FROZEN their HELOCs for her clients!!” </p>
<p>FROZEN HELOCs
<a href=“http://www.lindaptaylor.com/blog/[/url]”>http://www.lindaptaylor.com/blog/</a></p>
<p>
</p>
<p>These are the lenders who are chin-deep in the subprime mess. While I’m not planning to dip into our HELOC with B of A for tuition purposes, it is nice to have one just in case, and the news about the wave of freezes is disturbing.</p>
<p>Countrywide was a mono-line lender that didn’t have the diversity of business as the others you mention. They are the biggest lender in the nation, but they were especially hard hit by sub prime. WAMU to a lesser extent. Chase and Citi did not had less total exposure because of their business model. </p>
<p>To Jiff-I would appeal the freeze decision being in your shoes even if you don’t need the money right now. What is the sense of a HELOC if you can’t draw on it? The Chicago area has seen pockets of decline, but they have been relatively small and you have evidence to support you when you claim the value of your home has not declined. Like I said earlier, Florida, California, Las Vegas, Phoenix, I wouldn’t like your chances. Chicago you should be good with the strong credit score behind it.</p>
<p>Home equity is a line of credit, once a bank has issued it then it’s recorded on the bank’s balance sheet(I am not an accountant). Every bank is only allowed to issue X amount of loan against its deposit. Bank makes money by the difference of the interest it earns on the loan and interest it pays on the deposit (net interest). If you are not using the equity line that means the bank is not earning any interest. There is very little credit lending at this time, the bank would be better off to re-issue the line of credit to someone with good credit and would actually use the equity line.</p>
<p>
</p>
<p>How do they know you would use it?</p>
<p>They give incentives to transfer your credit card balance or other loans into your credit line, or they would prefer for you to take out a home equity loan (not a line of credit).</p>
<p>USAA is not in the sub prime mess - just not that type of lender.</p>
<p>Quote: “USAA is in the best financial strength position it’s ever been,” Matus said. She said her challenge will be to keep the company’s triple A rating in a down economy. Part of that will include looking at USAA’s long-term exposure to catastrophic losses when disaster strikes houses insured by the company.</p>
<p>USAA “completely avoided” the subprime lending market and investments in companies with subprime loans, Matus said. That puts the company on better footing to cope with a difficult economy, she said."</p>
<p>[Matus</a> is promoted to CFO at USAA](<a href=“http://www.mysanantonio.com/business/MYSA012908_execprousaakm_en_91a4bb17_html.html]Matus”>http://www.mysanantonio.com/business/MYSA012908_execprousaakm_en_91a4bb17_html.html)</p>
<p>Has any one actually heard of USAA freezing HELOCs for anything other than places where the equity has evaporated?</p>
<p>Ellemenope… that’s exactly how we lived for many many years while H was building a business. Those quarterly checks couldn’t come fast enough and it was so frustrating because basically they were gone pretty quick. I know we don’t do that now at all, but the quarterlies still end up being sucked up in one way or another (and is probably why tuition payments are due in July and December!</p>
<p>somemom,USAA has been offering us a HELOC for some months now. We’re considering taking it, although we already have one (unused) at Citibank. I’d feel more secure with USAA, I think!</p>
<p>DW was beneficiary of a conservative Midwest upbringing. During my consulting days checks arrived just four times a year. I couldn’t even let DW see the bank statements! I did find I became much more disciplined about spending when it was thirteen weeks between checks.</p>
<p>I went through this recently. I had to pay for an appraisal as part of the appeal…I knew the value of our home hadn’t declined as they said it had. Appeal was successful. The day after the funds were restored, I withdrew a chunk and deposited it in a Savings account. Didn’t want them pulling the same stunt in six months or a year if I really needed access to the money. A small interest differential is a small price to pay, imho.</p>
<p>TheDad–be a patriot and put that money to good use stimulating the economy–not hiding out in a savings account! :-)</p>
<p>^^ plus “I think many have been financing their kids’ tuition through their home.”</p>
<p>Two years ago a “really good” Financial Planner was recommended to my brother. The FP’s advice was to put all cash into the market, and open a HELOC as the emergency fund. Brother and I thought this was ludicrous. But I admit I was one of “those people” who used a HELOC to fund college educations. Freeze Away — won’t hurt me since (it’s maxed out and) my eldest graduates in thirteen weeks. But I can see how a frozen HELOC would disrupt anyone who had a FP like the one recommended to my brother.</p>
<p>For what it is worth - the value on our primary residence, according to the county - has increased by 30%. Yep, they did happen to update it just as the nationwide house market came down crashing. We have appeled x 2, including the hearing, and we still lost. I do own a big, beautiful house with a great, private backyard. I love my house and I do feel tht the price the county has assesed it at is OK. But the 30% increase is painful.</p>
<p>We do own three propertis in the state we live in. Two of them have open HELOC accounts, one with WaMU, the other with Washington Mutual. We have not received any letters pertaining to our HELOCs.
I live in the very conservative state, with the lowest foreclosure rate and the prices rising/staying put but house sales definitely down, especially in the higher end.</p>
<p>If you have not received notification of a freeze, is it possible that the bank will so no when you request a loan on a home equity line of credit?</p>