<p>We received a letter from our lender freezing our HELOC.</p>
<p>We currently have no outstanding balance on the HELOC. Our first mortgage is only for 40% of the value of our home (our equity is 60%) and we live in a suburb of Chicago where property values are running approx. 4% above where they were last year at this time, so our property value is not declining.</p>
<p>Wow. Some properties have declined 40%. Didn’t realize that. </p>
<p>I just wrote a check to cover tuition – borrowing from our HELOC, until funds become available from another source. Hope it doesn’t bounce . . . I don’t think property values have fallen 40% around here – but prices have started to dip.</p>
<p>I read the same article in the local newspaper recently. I think the lenders freeze HELOCs for certain county so it does not affect everybody equally.</p>
<p>DH and I have credit scores in the low 800’s, our first mortgage and (currently zero balance) HELOC constitute only 60% of the total value of our home. And, as I’ve stated, our local property values have risen every year and though the appreciation has slowed slightly, homes are currently selling for 4% above what they were a year ago.</p>
<p>The HELOC freeze appears to be spreading throughout the US, has little to do with total loan to value ratio, and has little to do with credit worthiness. The lenders just don’t want borrowers to draw funds on their HELOCs.</p>
<p>It’s different for different lenders. I read Countrywide bank is one of the lenders that sent out notices. I don’t think it has anything to do with your credit score. I have a huge HELOC line and I have not received any letter in the mail yet.</p>
<p>Agreed re different lenders. We have an untapped HELOC and have not received anything. Concidentally, we live fairly near the main Countrywide headquarters. They are closing up, laying people off, etc.</p>
<p>I’ve been preparing to do my daughter’s documents for next year and was concerned about how the school would view “0” in the equity column since it wasn’t zero last year, but it seems as if others might be in the same situation.</p>
<p>This is a bummer for anyone who gets a large portion of their yearly income in lump sums such as a bonus. There are many people who get paid $$, draw down on their HELOC for $$, and than pay off the HELOC when they get their $$$$ bonus at years end.</p>
<p>Thanks goodness I am with a local Credit Union not doing this with no exposure to national mortgages.</p>
<p>I use the credit line for lump sum payments at the start of each semester and then I pay it off as the year goes on. I would be in a bit of a cash flow issue without that and have to go into savings.</p>
<p>Property values are still rising here, although the high end house sales have slowed considerably and are staying on the market longer. Mid priced housing is still selling very well.</p>
<p>well don’t tell my credit union- because I am not interested in increasing my loan- but while I was researching comparable property sales in the hopes that I could have our assessment lowered- I was interested to find that while I thought our house was over priced, other homes on smaller lots are selling for $200,000 to $300,000 more than our assessed value ( after some remodeling, I m sure)</p>
<p>I asked a mortgage broker neighbor at a party last night about the HELOC freeze. He said they had a few clients call over the past few weeks to tell them their lenders froze their HELOCs, and that several lenders were involved.</p>
<p>After his office looked into this, they found that the lenders that are beginning to freeze HELOCs are WaMu, Chase, Citibank, Countrywide, and USAA, but there could be more.</p>
<p>He said that so far, Countrywide has notified 122,000 borrowers across the country that their HELOCs were frozen.</p>
<p>His office is concerned that this is just the tip of the iceberg. Too many people pulled too much equity out of their homes, and now many of us will suffer the consequences of that - frozen HELOCs.</p>
<p>So I wonder how home equity will be figured into EFC with respect to schools who look at home equity. I wonder if they will expect parents to move out of their homes to tap into it (like that is going to happen in lives of most families), or take out a new first mortgage (which could include points, and legal fees)?</p>
<p>Jiffsmon: I share your anger. I am infuriated at the entire situation as it takes away an important option that many of us would consider using at some point.</p>
<p>When I saw the title of this thread I ignored it because HELOC wasn’t a familiar acronym to me. When I realized what it was and read the article I was shocked that there were only 14 responses. So maybe others on the forum are in the same situation; maybe a new title like “No More Home Equity Loans” would wake people up. I think it is the tip of the iceberg and you just happened to be the tip. </p>
<p>People will start to notice as it is only going to get worse. Parents of HS seniors still have a few months to see the direction of the economy before they tell Junior he can go to that high priced school. It’s the people with college freshman that are going to get hurt because when they made their decisions on how much they could pay for school the economy looked very rosy.</p>
<p>I am surprized to read this, since the lender’s ability to control access to the line, once recorded, should be limited only by the fine print in the loan documents with the borrower. That means that the decision to close the line - IMHO - should be borrower dependent - not general economy related. I would not be surprized to see this pattern claimed as an unfair lending practice in short order. </p>
<p>The larger issue is that the banks are summarily afraid of all this access to credit, which suggests a bigger fear to me. They are afraid of a ‘run on credit’ in a bad ecomonic spell. Suddenly, I am very happy that I pulled my sons college monies out of the market in December.</p>
<p>Jiffs-you just named most of the biggest mortgage lenders in the nation. I work in the mortgage business and can tell you the freeze is generally applied for either homes in perceived soft markets or to borrowers with low or rapidly declining credit scores. Your situation doesn’t appear to be either! Your credit scores are stellar and he live in a desirable area of Chicagoland. I would call your lender to determine why you were frozen since it isn’t happening to all borrowers at those companies. </p>
<p>Another explanation may be the type of loan your initially took. If you first mortgage is looking at a rate adjustment or negative amortization you may be included. </p>
<p>My advice to anyone that absolutely needs the HELOC money is to take the draw now for next year. Especially, if you live in a hard hit Real Estate market, such as California, Florida, Las Vegas, or Phoenix. It will cost you a little more, but even a simple money market fund deposit will earn enough to cover most of the payment as many lenders will start with below market rates. Just be careful to complete you FASA before drawing the money. Perhaps someone else can give you better advice on this as it relates to Financial aid. Also, keep in mind that borrowing against a declining asset is usually a poor strategy, be sure you are confident in your local RE market and it’s ability to rebound. </p>
<p>Countrywide is known for high loan-to-value, negative amortization loans. They have tightened up considerably and that won’t change anytime soon with BofA taking control. Good Luck.</p>
<p>I wonder how the housing market is going to affect college tuition pricing in the long term. I think many have been financing their kids’ tuition through their home. That approach may be drying up and colleges may find fewer able to enter the game.</p>
<p>I am a U.S. citizen and live in the U.S. in a place where home equity products are not available. As a result, for possible emergencies like being downsized from a job, we keep a large amount of cash, money that would otherwise be equity in our home, in an easily accessible savings account. The financial aid powers-that-be consider savings even more available than home equity, which puts our EFC through the roof. This was a big factor in our son’s choice of colleges.</p>