Feds Warn Thrifts In Response To Complaints From Hot Homeowners Feeling Screwed Over By Frozen HELOCs

In Washington, D.C., a syndicated article from the McClatchy Newspapers reports:

• After a rash of consumer complaints, the federal agency charged with regulating savings and loans warned lenders that they cannot arbitrarily change the terms of home-equity loans.

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• The Office of Thrift Supervision issued a six-page letter of guidance to the institutions, called thrifts, spelling out their obligations on home-equity lines of credit [HELOCs]. These revolving lines of credit were popular during the housing boom of 2001 to 2005, when people could easily borrow against the equity in their homes to pay for college tuition, build a garage or remodel a kitchen. [...] Now, many borrowers own homes worth less than the value of their loan, and home-equity lenders are tightening up amid rising defaults.

• As national housing problems worsened, the federal agency began fielding complaints that some of the 830 thrifts under its supervision were freezing the credit promised to borrowers and altering rules for accounts that weren't supposed to be changed.

For more, see Thrifts told not to alter loans (Complaints rise as lenders freeze home equity lines of credit).

See also: The Washington Post: A Wake-Up Call on Home Equity Loans.

For the six-page OTS letter of guidance, see Home Equity Line Of Credit Account Management Guidance (discusses violations of Truth in Lending Act (TILA) / Regulation Z ); fair lending issues under The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B; a Fair Credit Reporting Act issue, and possible allegations of Unfair or Deceptive Acts or Practices).

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