SVP Banker over HELOC Division wrote on Feb 4, 2008 6:12 AM:This is smart and long overdue for banks, and will show the borrower (emperor) has no clothes.

A very high percentage of homeowners use HELOCs as checking accounts, some even to make payments on their first mortgage and other debts their income should be covering. Banks are also getting killed on these loan products, and my bet is that they will go away altogether very soon. Regrettably, we should expect enormous economic calamity to occur when that happens.

Jay Jay wrote on Feb 4, 2008 9:27 AM:Good points in this article, when these houses foreclose the seconds and thirds get nothing. And this will have a big effect, short term bad, long term good on the economy. Many people have been suplimenting their living expenses, even mortgages with HELOCs. Funny about the realtor, instead of having savings earn interest that he dips into during slow times, he had a credit line that he pays interest on and dips into during slow times. He sees a fat credit limit as the same thing as savings.

chris wrote on Feb 4, 2008 10:30 PM:If jay jay would think for a minute, if you pay your heloc balance down the amount of money you pay interest on goes down, therefore your monthly outgo on payments is reduced and a penny saved is a penny earned. tell me where you can make more than 6-8 percent interest in a savings account??? think mcfly think outside the box...

Andy wrote on Feb 5, 2008 3:10 PM:These (and interest-only loans and ARMs) can be great for a responsible borrower. However, as living costs have been rising so dramatically over the last few years, more and more people have relied on HELOCS and credit cards in order to just pay bills. That is not healthy for the economy. Something is very wrong here.

We are in the midst of a very serious credit contraction...debt deflation...whatever you want to call it...much more than the media would lead you to believe.

tony wrote on Feb 5, 2008 4:14 PM:A bank is someone who will enforce the return of the umbrella in case it starts to rain.

GEORGE wrote on Feb 5, 2008 6:10 PM:First of everything: they should live in their limits. Why by all means these people (real estate pro), don't live based on their gains ? I think they are the very first one to blame for the bad situation that is getting onto them... God giveth and taketh away...The same pain that they have delivered into other people is coming onto them now.

Jim wrote on Feb 5, 2008 7:37 PM:The key word in "home equity line of credit" is ......equity. If the equity is gone then it is simply an unsecured line of credit.

fmr broker wrote on Feb 5, 2008 7:48 PM:any bank that knowingly lent money for a second or third or even fourth lien near or over the equity should should lose their money and go bankrupt. what could have possibly made the greedy whores on wall street think these homeowners could make their payments if they were already stretched to thin. the market is not bad its getting right where it needs to be. these corrections are necessary for any resolution to come about. washington needs to stay out and let the market run its course. I was inside this mess for the past 7 years and this is the tip of the iceberg. the titanic hasn't even sprung its first leak yet.

James bank manager wrote on Feb 5, 2008 9:37 PM:Banks that make decisions in the short term deserve what is happening. The ones that have remained steady would love to talk to Customers like the Lein's when the big boys shut them down. Customers are people, not commodities. To the broker, you are out now because you have to be out. Most brokers should be making payments on the bad loans they made and/or thrown in jail.

Frank financial co. owner wrote on Feb 6, 2008 6:24 AM:James you could not be more wrong with your assessment. The banks definitely view the customer as a commodity. That’s why these wild loan programs were created in the first place. They were designed to generate more loan volume so the greed bigs of Wall Street, mainly the banks and the hedge fund Managers could make Billions. I will however give the banks credit for one think; they have done a masterful job of spins this whole mess. They simple blamed the brokers. The brokers didn’t design the loan programs or the guidelines, nor did they underwrite the loans, the lenders did and now the stockholder not the banks are paying for it. Furthermore, the account executives who work for the banks promoted these programs like crazy. See the example below!!!

THATS RIGHT, STATED/STATED AT SOVEREIGN BANK IS PAYING 101.00 AT 5.625%!!!!!!!!

Mary wrote on Feb 6, 2008 10:11 AM:I would definately check my closing costs on my closing papers to make sure I did not pay any fees associated with a credit line I do not have access to. Title companies and the lenders all charged fees for the size of the loan.

Retired young wrote on Feb 6, 2008 1:35 PM:Let those that lived beyond their means lose it all. if you cant afford to pay back your loan thats your problem.

Woody wrote on Feb 6, 2008 2:22 PM: Welcome everyone to the sad reality of "The New World Order" Life in the United States will never be the same. You would be smart to batten down the hatches cause the storm that is on the horizon is going to devastate like many of us have never seen. The Great Depression pales in comparison. We Are In The End Game, and this is the final hour. Have fun you greedy crooks cause Judgement Day is coming, and your payment is now overdue!

seak22 wrote on Feb 6, 2008 2:55 PM:when all hell breaks loose just remember that RON PAUL tried to stop the havoc this is going to cause to everybody and anybody that owns realestate and is involeved with a bank credit unions are a safer bet even now back in the dark 30's those who had credit unions were in many cases unable to get the cash out also but when things loosend up they still had some money there for them. the banks well sucks to be you!

D H wrote on Feb 6, 2008 3:45 PM:Within the past two weeks Countrywide has mailed home owners a bill for $75 a year to keep these Home Equity Loans open. They also included blank checks for the Home Owners to use to obtain the funds!

Deet wrote on Feb 6, 2008 6:20 PM:I am a fellow Ron Paul supporter, it would sure be nice not to have to say "we told you so", the problem is the monetary system! Sound money is what is needed! A gold backed competeing currency along side the USD! Listen to Ron Paul, VOTE Ron Paul!

Juliet wrote on Feb 7, 2008 7:47 AM:I totally saw this comming and maxed out my HELOC in September. The U.S. market is rolling over, get your money out of the dollar. Gold, Silver, and Euros are safe havens. Don't trust the Fake CPI numbers the Gov gives out. ... Inflation is around 11% not 2%. The gov CPI doesn't even count food and energy(basic needs of life).

RICHARD B wrote on Feb 7, 2008 9:17 AM:Home equity loans should have never been allowed in the first place. It has been used as a tax loophole for people who cannot deduct the interest on a new car and other things, so they get a home equity loan,buy the car, and then they can deduct the interest on the home loan. All of this is outrageous! The government is being cheated out of billions in tax revenues and they continue to allow it. People should show some restraint as consumers and the government should stop trying to "grow" the economy at any cost. I have no sympathy for people who are in trouble on home loans

Ben wrote on Feb 8, 2008 9:53 AM:Cheated out of taxes? What the hell is that? Here in California where if you take the effective tax rate of federal, state, county, and local it is near 50%. I would love to know who is really being cheated here? Taxes are too high and the economy is too distorted due to government interference. Economic growth is achieved by savings, a sound monetary system, low taxes, and VERY VERY LITTLE government intervention. Capitalism is a very good tool to 'separate fools from their money.' It is doing it now. Cheated out of Billions in tax revenues? Most free market economies grow via true capital investment and innovation not tax and spend policy. This bubble in real estate was not true capital growth just an inflationary bubble created by ultra cheap money. Money that is worthless if you believe in The Austrian School of Economics. This is evident by the current price of gold, which will be going even higher in the coming year or two. Let the greed of many cause the collapse and let the market and economy return to sound fundamentals.

RICHARD B wrote on Feb 8, 2008 1:24 PM:I Don't believe in the Austrian School of Economics and I don't think Ron Paul is getting the idea sold very well either. I think that the price of gold will collapse and that the economy will remain weak for a year or so and then return to moderate growth. Anyone who would live in California gets what they deserve. Your state has spoken and the people there picked Hillary. I have no sympathy for the people of California.

Ben wrote on Feb 8, 2008 3:23 PM:Well no one has to "believe" in Austrian Economics,it has it;'s own track record of being uncannily correct. Ron Paul has more problems with selling his other policies than with the monetary issue. Econometrics is a farce. Unfortunately, it is a farce we run our economy by. Silver has kept pace with gas prices at about 5 gallons per ounce since fuel was available for consumer purchases. Metal has a proven record of being inflation proof. I do see weak economic years to follow, perhaps depression, however government intervention will make them worse all of which we are sure to have under Hillary. I live in California because that is where I could find a job when I was medically retired from the Army. Given the choice I would go back to the Southern States as that is my home. Gold is nowhere near its top yet. When silver closes to 15-20 times less than gold per ounce that is where the top is. Gold is at 50 times silver. There is a long way to go yet, and I am sure I will have the opportunity to say, "I told you so", to a lot of people along the way. However, I will be much happier just to have the security of purchasing power to provide for myself and my family rather than gloat.

RICHARD B wrote on Feb 9, 2008 5:56 PM:With all due respect to any and all who believe in precious metals as a safe store of wealth, the fact is..It is just not practical. Metals have no intrinsic value and do not produce a revenue source as do other money instruments. I am also retired and have had the good fortune of being a member of THE TEAMSTERS UNION for over 30 years. I have amassed a fortune that would knock your eyes out. I did it, not by living within my means, but by living less than my means as did the great investor, Peter Lynch. Simply stated, I have exercised restraint in everything that involved spending money for my entire working life. And now at 58 I am flush with cash and can do about anything that I wish. I have a B S E in Economics and I'll admit.......I don't have the answers to fix this economy. Nobody can fix it.

john wrote on Feb 11, 2008 11:25 AM:if the lenders think that closing the equity lines is going to help them,wait and see the late payments coming,i had a credit line for the last two yaers with a loan amount of $200,000.and used $34,00.i am in sales,and when i make commission,i put the money back that i used the month before,and that has help me in my work.

Gary R wrote on Feb 13, 2008 10:48 AM:Countrywide - Brilliant business plan! Hah!

Alienate your responsible borrowers nationwide who have high credit scores and DO have plenty of documented equity in their homes by freezing their accounts because some borrowers 2,000 miles away in CA are upside down (debt exceeds equity) and/or aren't paying their bills.

Pi$$ off the money-maker cash cows by freezing access to their equity, but cling desperately to bad, unsecured debt.

Their business plan is backwards. Countrywide is going down!

jack wrote on Feb 14, 2008 10:38 AM:Hey chris.. dont forget the interest you pay on your HELOC is deductable. Meaning that 6% you are paying on it is really only about 3%.

Walt wrote on Feb 19, 2008 2:39 AM:With all due respect precious metals unlike paper have intrinsic value. They can't be distroyed by fire, or counterfited, a government is not needed to back up the value. Precious metals have uses in ornament, in industry and they are difficult to produce. That is where their value is, that is why they are a good store of wealth. They do not create wealth.

A good invester is one that has a balance portfoilio. Any investor that is "flush" with anything (example: cash or house) is a fool, and about to be taken to the cleaners.

I agree that Keynesian economics can keep the economy going but only to a point. It distroys the savings of the thrifty and rewards the spender. What happens when the spender runs out of money? That is what the U.S. faces now. We are to the point when stimulating the economy begins to break down. I fear we face a Wilhelm Germany type event. Consumer based economies do poorly compared to manufacturing based economies in recessions.

I will leave you with a quote that fits the bubble: You can fool all of the people some of the time, some of the people all of the time, but you can't fool all the people all the time

Shaun Nobody wrote on Feb 24, 2008 3:07 PM:Here's the deal.... In my case, WAMU stopped the equity line without notifying me whatsoever. The brokers and investors and people with immediate medical needs planned on a given amount of carrying costs, and gave forethought into future interest based on the banks commitment. The bank assessed the value in a declining market for most of us -- thus, considering the possibility of a decreasing value. They chose the amount and the terms, and competed against each other for our business. Now that they have it, and froze it, our NEW debt ratios have severely affected our FICO scores - due solely to the lenders' action of covering their naked behinds with our equity. We do have the right to challenge their decision. However, we have to use the same appraisers that erroneously valued or de-valued our property in the first place; and we have to pay for it; and THEN, the bank can decide if they care. Because the FICO's have dropped (over 100 pts in my case), there's no chance of refinancing with a local bank -- even though the equity is there, and my history is immaculate. Truth be told, if I even had a month's warning; I would have rerouted my financials, and determined a different course of action with little more than a grunt. Unfortunately, I can no longer stop any foreclosures in my area, teach people to prepare for home ownership, nor put money into the economy until a different avenue opens up for carrying costs. The banks have ultimately harmed themselves and our economy by cutting off people like myself. More homes will foreclose, more medical bills go unpaid, and jobs that can remotely be considered part of the luxury economy will be lost, and entire industries will move even faster to other countries.

b d wrote on Mar 11, 2008 9:28 AM:I have a 760 fico and my wife's is 810, we have over $400,000 in equity,no other debt then $195,000 first. We have a $165,000 line of credit w/jpm, the current interest rate is 5.75 which is lower then my first at 5.875. Being a contractor and business slowing down considerbly i'm thinking i should pull out $150,000 and put it into 8 month c d paying 4% before they freeze my line. I currently have about $12000 in the bank for current monthly bills, which doesn't feel very much like enough of cushion if income slips for a while. I would appriciate any comments on weather this is a good idea or not as finance is not really my strong area. tx alot b. d.

Allen wrote on Mar 14, 2008 11:12 AM:Can anyone tell me if the banks are required to give notice before freezing. We recently received a HELOC and are having work done around the house (the supposed real reason for a HELOC) and went to write a $2000 check to the contractor this morning and were unpleasantly surprised when we tried to transfer the money. Bank of America has definitely lost my business and respect!

Eric wrote on Mar 14, 2008 4:02 PM:Our home addition was delayed waiting for permits and now we can't even start because the b@#$%ds at WaMu dropped our HELOC to next to nothing. We have impeccable credit, I am a surgeon and my wife an attorney (both employed) but we just don't have the ready cash to do our remodel. Is WaMu surprised that allowing people to buy million dollar homes on a 50K salary three or four years ago backfired on them? Shame on them for hurting responsible consumers. They all belong in jail.

Laura wrote on Mar 20, 2008 7:47 PM:I just received a letter from Washington Mutual telling me my HELOC dropped from 75K to 30K. They said that my property dropped significantly in the letter they wrote me. The funny part is the home only dropped 3,000.00 in the last 4 years that I bought it. So where they came up with that I have no clue. I think they are basically just giving me a bunch of bull crap. They could of just said they are worried people are going to run off and take the money and leave the house empty. That would of made more sense. Maybe it's time to shop for a more honest mortgage company.

Mark wrote on Mar 21, 2008 11:08 AM:We recently paid $20k into our HELOC in order to not pay interest on that money while we wait for taxes to be due in April. We had been saving the money for tax day and for a new car. Now we can't get the money back out to pay our federal taxes!. Thank you Chase! Our home's newly determined value still leaves our loan to value ratio at about 75%. This is disappointing that a number of terribly poor business choices by greedy banks and poor choices by individuals causes the rest of us to suffer their consequences. I have had a enough of our consumer debt driven society. My goal is to go on a cash only basis other than my main mortgage, and hopefully to pay that off sooner rather than later! No more debt for me.

chuck wrote on Mar 22, 2008 9:42 AM:what comes of the closing costs and fees based on full face of the loan?

Beth wrote on Mar 25, 2008 4:38 PM:I agree with James Bank Manager. It's the responsible banks that always lended conservatively that will stay credible and not feel the pinch as much. The banks that inflated appraisals and approved loans frivolously that are now rebuking their loans and causing problems for millions.

Al wrote on Mar 29, 2008 2:27 PM:Got 65K from my 100K HELOC to build my vacation home. Now Citi reduced my 100K HELOC to 65K. Damn! But it pays 4.49% now , so it's cheap credit. Gladly, my vacation home appreciated and I have an approved cash out-refi ... will get about $23K. I'm going to keep this additional cash for emergency funds.

Ken wrote on Apr 15, 2008 9:08 PM:WAMU is doing same thing however you need to check what value they using for your home. They saying they don't determine value it's dome by a third party company. what you don't know is the third party uses inaccurate comps and they the third party charges you additional money for them to appriaise your accurately. if you call wamu they blame on the third party company if you call the third party company they blame it on WAMU. It's really a joke. After these I will never get a home loan or equity line them in the future.

Smart A$$ wrote on Apr 18, 2008 11:05 AM:Knowing this was coming, I maxed out on my Heloc. Hehe!! Now the bank can't touch me. And yes, I would not use it to pay my living expenses. Of course not! I have that covered with the money I generate from my business. But I will use that money to make more money.

And of course, it won't be invested on real estate for now. I have ways to make money investing it in equipment that will generate more cash. The bank charges me 6% per year on my HELOC. I make 20% per year on the borrowed money.

It does not take a genius to figure out that my preemptive move works.