We just received a letter from our HELOC lender informing us that the value of our home has gone down 40%!. And not to write any more checks against it. We just got the line last June. The property sales values in our town have not changed at all in the last year. This was an “automatic” valuator amount. So if you are anticipating needing your line in the near future, tap it now.
Don
Don,
I’ve heard about this happening to people and have been concerned as well. Can I ask who your HELOC was through and what area of the country you are in?
I have my 1st and HELOC through Wells Fargo. I really don’t want to pull money out if I don’t need it but may decide to tap into it anyway for some other potential investments.
Howard
First national, they are not writing any more HELOCS, Located in western new york, where prices never move much
For those who have HELOC’S - tapping it now could be a problem if the HELOC has a call provision. In other words, just because you have the money (liquid or otherwise) does not mean the lender can not call the loan if the note has a call provision.
Read your docs to be extra careful,
Karl
Available credit on a HELOC we have on a rental house in Central Florida dried up about 6 months ago. We received a letter from Century Bank telling us they would grant no additional draws on the funding. We originally got that LOC specifically for investment purposes in our park, and have a signficant amount of it invested. Luckily they did not have a call, so we just receive our invoice monthly billing for interest only. We pay more than that, but that is our preference.
We were not overly upset about the situation. Our first mortgage and HELOC are about the amount of money we could currently sell the house for - not anywhere near what it was worth when we got the loan. It is quite possible that if we sold today we would have to take money to the closing table. (Instead, we have a new renter for June 15th.) We had stopped tapping the line because we knew what was happening with values in the area, and did not want to get boxed in.
Karl had a great point - we would have had to scramble to get the funds to cover our investment we made via the line.
Here is some additional info:
Daily Real Estate News | May 30, 2008 Study: Top Lenders for Home Equity Loans
Despite the upheaval among lenders and declining home values, customer satisfaction with home-equity lines of credit remains high, according to the J.D. Power and Associates 2008 Home Equity Line/Loan Origination Study released May 28.
"Ongoing troubles in the housing and mortgage lending markets have had the effect of lowering customer expectations around the home equity loan and line of credit origination process,