Scrutinizing Equity Lines
April 2, 2008
Several weeks ago, during a conversation with the owner of a Mortgage Lender here in South Florida I was told that some large banks had started blocking existing HELOC’s ( Home Equity Lines ).Later that week I had lunch with a couple of title attorneys and they claimed that they had a closing held back because the HELOC Lender decided that they wanted a larger payoff than originally was understood. A March 27, 2008 article in the NY Times featured HELOC’s and lenders that were blocking or not allowing short sale contracts to close because of the relatively small payoff stated…. ” Lenders and investors who hold home equity loans are not giving up easily……” although in the event of foreclosure the HELOC would not get paid at all. They went on to say that ….”Americans owe a staggering $1.1 trillion on home equity loans, and banks are becoming increasingly worried they may not get that money back…..”
These events made me stop at a couple of the larger banks in the area for a conversation with the local bank employees. What I found was pretty consistent from one bank to another. HELOC’s are being blocked in many declining market areas throughout the country. If it’s an open line and hasn’t been used it’s a target. If the bank feels that the home value has fallen below the criteria or it may “put someone upside down” in the home it may be blocked. I was told that non of this has to do with credit or bank balances but simply with home equity. Furthermore lenders are beginning to block refinancing attempts unless the HELOC is satisfied first.
At least one bank executive told me that their concern is of course for the homeowner and that any preventive measure may insure the ability to keep the home should financial trouble arise. When I suggested that it would also insure that they reduce future losses they agreed absolutely and reasoned that …. if putting pressure on short sales, for less of a loss forces a foreclosure now and then, so be it.
It seems to me that banks that went big on equity lines, piggy back loans, 80/20’s etc. may be running for cover before the next round of fire is launched on lenders and lending institutions.
If you have a HELOC and you think you may need some of it later, you may want to transfer some to a money market or short term CD for awhile. If your HELOC is not affected you can of course put it back at anytime.
George Sinacori is a Licensed Real Estate and Mortgage Broker in Florida. Practicing and investing in residential real estate in South Florida since 1990. Previously involved in residential, commercial and business investments in NY, he presently operates GES Real Estate, LLC a discount real estate brokerage in South Florida. He is a military vet. He holds a bachelor degree in business management.
GES Realty LLC is small and experienced with 4 broker/agents in 3 counties including himself.
Contact him at 877-566-2430 or 561-306-6736. You can reach George on the web at www.ges-realty.com
You can also email George at george@ges-realty.com
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