Significantly Declining Home Values Cause Bank Suspension Of Homeowners' HELOCs

In Mentor, Ohio, WKYC-TV Channel 3 reports:

• If you drive down Case Avenue in Mentor you'll find lovely homes with flowering trees in a beautiful stable neighborhood. Residents, Mac Mahaffee and his wife, Linda where shocked to learn that their lending institution had a different view of the value of their two story brick home. The Mahaffee's received a letter from AmTrust Bank telling them that their property on Case Street has experienced "significant declines in property values". Amtrust told the couple, "we have elected to suspend further advances or draws on your Home Equity Line of Credit", effective immediately.

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• The Mahaffee's are from alone. In recent months, several other major banks across the country have shut off home equity loans to tens of thousands of people. [...] AmTrust Bank is joining a growing list of national banks that are critically reviewing all current HELOC's. There is a growing fear by many lenders that HELOC delinquencies could rise in 2008. Countrywide Bank has already suspended an estimated 122,000 lines, many in high-foreclosure-rate states. Bank of America, USAA, Citibank, and Chase are reportedly going to follow suit.

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• Financial planners suggest that if your HELOC is in jeopardy and you need the credit to complete a home renovation project, you might consider pulling out a lump sum. Many experts suggest that you should only borrow as much as you need right now and put the remaining cash in a high-yield savings account or CD until the repair or renovation bills are due.

For more, see AmTrust Bank freezing Home Equity Lines of Credit for certain customers (read story) (watch video).

In a related story, see Bloomberg News: Countrywide Takes Away Home-Equity Credit Lines in Las Vegas.

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