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peter
6465 Posts |
 Posted - 01/31/2008 : 6:30:55 PM
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Trying to tap into home equity? We'll see
Countrywide and others tell thousands of homeowners that they can no longer borrow against their credit lines as the companies tighten standards.
By Kathy M. Kristof and E. Scott Reckard, Los Angeles Times Staff Writers
1:44 PM PST, January 31, 2008
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.
"The Fed is pushing on a string," said Peter Morici, an economist at the University of Maryland. "Unless you can significantly expand the ability of banks to provide credit, the Fed's efforts are not going to do much to ameliorate a slowdown."
Among the lenders tightening as the Fed loosens, Chase Home Lending, which has been slowly raising credit standards since last summer, will start imposing new guidelines Monday that further restrict who will be granted a home equity line, the company said. This week, California homeowners can tap as much as 90% of the equity in their homes. Starting Monday, however, Chase won't let homeowners in certain parts of the state -- including Los Angeles, Orange and Imperial counties -- borrow more than 70% of the value of their homes.
http://www.latimes.com/business/la-fi-loans1feb01,0,6255734.story
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rccorphomes
107 Posts |
Posted - 01/31/2008 : 6:52:44 PM
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If they are reducing the amount they can receive on the equity line, then they better have the mortgage released, and a new note drawn
Because their property is secured on a larger amount
Debbie All Credit
www.leaseoptionmls.net |
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propertylender.c
1627 Posts |
Posted - 01/31/2008 : 7:22:20 PM
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| This will be a disaster for the Los Angeles area. |
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