Trying to tap into home equity? We'll see (Lines of Credit Shut Down)

[RamboLiberal]

Source: LA Times

Tens of thousands of homeowners with home equity lines of credit are getting a rude surprise: They've been told by their lender that they can no longer take money out on their credit lines because sinking home prices have put them "upside down" on their mortgages.

Countrywide Financial Corp. sent letters to 122,000 customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off.

The move by Countrywide, the nation's largest mortgage company, is part of a pullback by lenders nationwide on home equity loans, which are often used to finance home improvements and consumer spending. Such loans, also known as second mortgages, were widely available until six months ago, when delinquencies and foreclosures began to soar. Now, with new evidence of sinking home values, many lenders are requiring that homeowners maintain a much larger percentage of equity in their homes as a cushion against financial problems.

The tightening of credit could help limit the effectiveness of interest-rate cuts by the Federal Reserve and an effort by Congress and the White House to put more money in the hands of Americans via tax rebates and other economic measures.


Read more: http://www.latimes.com/business/la-fi-loans1feb01,0,6255734.story

[Baby Snooks]

1. They should have grabbed the money and run...

They should have done what the CEO of Countrywide did. Grabbed the money and run. He of course is a crook. His customers are just being rooked.

Reality is the economy in this country is being reflected by the housing sector. Overvalued and about to collapse under the weight of debt.

[sendero]

2. It seems lots of folks..

.. just don't understand the "downward leverage" this credit crunch/housing deflation is going to have.

It feeds on itself, and there isn't much out there to stop it.

[truthisfreedom]

3. Countrywide is STILL sending me notices that I have $30k in equity in my 2nd house

only 2 years after I bought it. Reality? It's worth $25K less than I paid. Ridiculous weasels, playing everything to the middle.