Home Equity - Latest Casuality
March 29th, 2008The way real estate prices are going down and banks burning in sub prime crisis, the latest casualty is Home equity sector. During economy boom time, banks granted record Home equity loans. In recent days the home prices have gone down like anything. Now many of these loans exceed the value of mortgaged assets.
To take a grip on situation, many banks have started tightening the belt in ways never expected before. Many people who thought that they have Home Equity Line of credit reserve for their bad days are coming to live with shock of their banks sending them notices of terminating the approved line of credit.
Countrywide Financial, says on its Web site that the practice is in keeping with regulation established by the Federal Reserve Board that says lenders can freeze loans if “the value of the dwelling that secures the plan declines significantly below the dwelling’s appraised value.”
What you should do?
In my opinion if ur line of credit gets terminaterd, unless you really have an urgent need of money avoid getting into new Home Equity debt. In current state of economy your house will be evaluated for lesser amount and it may even be more difficult to get good deal for Home equity. So if you can manage without a new Home equity debt right now, manage.
Here is another thought on crisis. These times are harsh especially in the financial world. Variable rate loans for homes were the big deal back a couple of years ago. Now they’re causing problems for homeowners who have them. The rates are changing and the owners can no longer pay the payments.