LOOK OUT!! Home Equity Line Suspensions Go Countrywide…City by City!

Posted on May 6th, 2008 in Mr Mortgage's Personal Opinions/Research

If you have a Home Equity Line of Credit (HELOC) with unused credit, you may not have access to that credit for long. A few months back Countrywide led the pack by suspending 122,000 borrowers from tapping their lines and now they have suspended ALL lines in the city of Las Vegas, Nevada. Other ‘bubble’ cities are being targeted across the nation.

Since January, Countrywide, WAMU, BofA, IndyMacBank and Wells have frozen hundred’s of thousands of HELOC’s preventing home owners access to money they thought was available. Many use these lines for home improvement, business, college tuition etc and now, have been left out in the lurch.  CONTINUED…

Home equity lines to 100% of the home’s value with little verification of income or employment were common until mid 2007. Nearly every large bank in the nation made these loans hand over fist. They were hell-bent on making it as easy as possible for you to spend every penny of equity in your home.

Now that values are down sharply across the nation and we are learning very quickly that the ‘negative equity’ (owing more than your home is worth) is the leading cause of mortgage default, lenders are in a panic. First, most have stopped making HELOC’s over 80% loan-to-value and to get one, you must be a near-perfect borrower.

For the banks, these loans present a major problem because they make up such a large percentage of the balance sheet at banks such as Wells Fargo, BofA, Chase, National City, Countrywide and IndyMac. In foreclosure, the second mortgage lender rarely gets a penny because homes sell at such reduced prices and the first mortgage holder gets it all. Because of this, many second mortgage lenders are not even foreclosing, rather using more traditional means of collecting. As a matter of fact, Home Equity Loans are being modified by large banks right now for those borrowers in distress. I am hearing of significant principal balance reductions.

To see how buried the nation’s top banks are check out this report by Fitch entitled ‘Big Banks Home Equity Woes’. Fitch: Big Banks Home Equity WoesFitch: Big Banks Home Equity Woes

Therein, may lie the silver lining for the home owner. In the future, lenders may just offer you a nice discount to buy back your second mortgage note. This gets you right in your home and gets them out of a very risky loan that have little to no value in the mortgage secondary market right now. Reports say these loans are selling for one to five cents on the dollar.

Below are a few other reports I have done on Home Equity Lines/Loans. If you have one of these loans and need access to the money, you may need to take action sooner than later. The reports below describe more about this crisis and what you can do to get ahead of this problem. -Best, Mr Mortgage

Referral Story – Bloomberg – Countrywide Takes Away Home Equity Lines in Las Vegas

MR MORTGAGE STORIES

Mr Mortgage – Home Equity Loans – A Big Bank Killer

Mr Mortgage – Home Equity Delinquencies Surge – BofA and Fitch Concur

Mr Mortgage YouTube Series – Big Banks Deadly Home Equity Exposure Revealed

25 Responses to “LOOK OUT!! Home Equity Line Suspensions Go Countrywide…City by City!”

  1. Sometimes I feel like a sucker for reliably paying off my mortgage, credit line, and credit cards. Sure, I have an 800+ credit score – but is that ever going to save me as much these people are walking away with?

  2. You forgot to mention CITIBANK. They were guilty of 100% financing, no income doc. loans, and funding 2nds behind NEGATIVE AMORTIZATION 1st mortgages. These neg-am 1st mortgages could erode 10-25% of a home’s equity when the principal balance reaches the cap. I told my clients months ago to cash out their HELOCs while they still could. Probably too late now. Keep up the good work. People deserve to know the truth and not the “hype”.

    Regards,
    Sharkee

  3. […] Read the rest of this great post here […]

  4. […] kolinasblog8810 wrote an interesting post today onHere’s a quick excerptSince January, Countrywide, WAMU, BofA, IndyMacBank and Wells have frozen hundred’s of thousands of HELOC’s preventing home owners access to money they thought was available. Many use these lines for home improvement, business, … […]

  5. I think if people get their principal reduced then sell or default later — ever — they should owe the whole balance.

  6. […] admin wrote an interesting post today on LOOK OUT!! Home Equity Line Suspension Goes Countrywideâ¦City by City!Here’s a quick excerptFor the banks, these loans present a major problem because they make up such a large percentage of the balance sheet at banks such as Wells Fargo and National City and in foreclosure, the second mortgage lender rarely gets a penny … […]

  7. If these people are living on HELOC money, where would they come up with the cash to buy up their 2nd mortgage note? Doesn’t make sense to me.

  8. Nothing makes sense. That’s the sad part.

  9. Hi Mr. Mortgage,
    Could you comment on http://image.minyanville.com/assets/FCK_Aug2007/File/fnmlg.jpg
    and this article:
    http://www.minyanville.com/articles/index.php?a=17042

  10. […] Jenn wrote an interesting post today onHere’s a quick excerptHome equity lines to 100% of the home’s value with little verification of income or employment were common until mid 2007. Nearly every large bank in the nation made these loans hand over fist. They were hell-bent on making it as easy … […]

  11. Living off of HELOC money? That’s no different than living off of credit cards, there has to be an end sometime. I expect a lot of these people were/are on neg amm mortgages too. Seems to me they were/are digging a whole deeper and deeper every month. Sound like a good thing they got cut off.

    Not sure if everyone knows but in Texas you can not get a HELOC or do a cash out refi for greater than 80% LTV. Nice little law put in place after the S&L debockle. I once thought it was a pretty stupid law, thinking different now as things are still just fine here.

  12. […] read more […]

  13. […] read more […]

  14. I think the most important step is to be realistic in what you can and cannot do. I’ve seen so many first time home buyers jump into something they cannot afford only because they have big dreams.

    Do your homework done first if you are thinking about taking out a loan or mortgage. The time spent looking into your options can save you a good deal of money later on.

  15. I’m with you Kis, one kinda feels stupid living within their means. We also have a fico in the top 90th percentile in the country (according to the reporting co.s)…..a few years back I really wanted to do some cool stuff in our yard, a pool, etc. But there was no way I was going to bet the farm to do it, heck, I should have, it looks like with the prices of everything going up (I live in the north east and we heat with oil….hitting $800 a fill up now!), I could have easily got us into default, darn, maybe that pool would have been free, along with the Coach bags I won’t buy for my daughter, oh and that big screen tv my husband wants. There is a seed change coming in this country and I think we are just at the beginning, unfortunatly it is going to get so bad, there will be no choice but for a massive bailout that the financially responsible will be left holding the bag for. In the meantime I just keep preparing for the worst and hoping for the best.

    BTW – I hold a 30 year fixed with countrywide, and every month they tell me I can have over a 100K if I’d just give them a call – Okey dokey!

  16. MR MORTGAGE!!

    The time is RIPE for a Reality-Slam on the GSEs, dont you think?!!!

    I am getting madder by the day, when I realize how they are just being loaded up with every garbage loan on the planet, and OF COURSE they will be set up to fail. It is so obvious what the FED is trying to do here, and more people need to understand how BAD the current situation is!!

    Thanks for considering the idea!

    AJ

  17. In 10/2002 I was outbid on a house in an affluent community. The winning bidder bought it for $425k and was a board housewife who thought buying real estate and renting it was the way to finance her kid’s college education in 14 years. After 6 years of renting, she is now deeply in the red and she doesn’t even realize it.

    The rental income never fully covered the mortgage, insurance, property tax, maintenance expense, vacancy, remodel, rental broker’s commission among other items. The current market value is about $466k and she is lucky if she can even get that since the market is declining. After a 4% broker’s commission, she will net $449k earning a $24k profit. According to my calculations she easily has paid out over $1,000/mo. over 6 years in (deficit) expenses or $72,000. Net net a total of a $48,000 LOSS. I tried to buy the property from her. She says she doesn’t want to sell and is insistent the market will come back.

    When you hear stuff like this you know the market will never come back for year sand years. It will take 15 years to get back to any high water mark again.

    When your housewife comes up with ideas like this you know it is the top of the market!!!!!!

  18. Hi there,

  19. […] Home Equity Line Suspension Goes Countrywide, City By City […]

  20. Gentlemen, I’ve just received word from a friend that CapWest, a company she was contemplating on doing business with was also owned by Citibank, a company whose largest stock owner is a Saudi national. Is there any truth to this. I’m sure she’d be extremely interested in your findings.

    Thanks

  21. there are several capwest’s. Capwest mortgage is owned by Farmers Bank & Trust, capwest securities, capwest partners in Canada. I just checked foreclosure records in CA and there is nothing.

  22. My heloc was just suspended based on an “automated valuation” showing my home was worth less than I paid for it. When I contacted Nat City for a copy of this appraisal or the data that went into it, I was rebuffed. I have triple-A credit and the appraisal is off by a mile, even in this down market. Their only answer was that I could get an appraisal myself, but I had to use a specific appraisal company. When I contacted this company, they advised that they ONLY do appraisals for Nat City helocs and that it would $775 thank you. Outrageous.

  23. […] Look Out!!! Home Equity Line Suspensions Go Countrywide…City by City […]

  24. Three months ago my brother tried to buy a truck using his heloc on investment property in Las Vegas. He has a credit score of 840 and equity in the Vegas home, but received a letter from BOA, although Countrywide did the HELOC, telling him his HELOC was shut down. He had a$50,000 line of credit which was at a zero balance.

  25. […] Look Out!! Home Equity Lines Suspensions… […]

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