If you have an equity line of credit that you plan to use for home improvements, there is a chance the lender could cancel that line, according to an article in today’s Washington Post.
With home values dropping, the article states, lenders are canceling equity lines of credit so that there is not more debt on the house than it’s worth.
"Countrywide Financial, the nation’s largest mortgage lender," the article says, "suspended the home equity lines of 122,000 customers last month after reviewing their property values and outstanding loan balances. The company, like others, has an internal automated appraisal system that tracks values."
Bank of America is beginning to do the same thing, a bank spokesperson said.
This naturally comes as a shock to people counting on their equity lines for such things as home improvements. Last year, according to a survey of lenders by BenchMark Consulting International, 29%of homeowners used their equity lines for home renovation.
So before you start tearing out your old kitchen with plans to refurbish it using an equity line, you should find out if that line will be available tomorrow.
The Times’ Kathy Kristof reported on the trend earlier this month.