7 TIPS . . . for Dealing With a ‘Here Today, Gone Tomorrow’ Loan

What if the bank promised to give you money to help pay for home improvements or college tuition, then, without warning, decided to take it away? It’s the latest domino to fall in this volatile real estate market. And we found it’s happening right now to thousands of homeowners. Could you be next?

 

Is this some sort of scam?

Nope, it’s not a scam. We’re talking about equity lines of credit — loans that allow you to draw money based on the equity in your home. Usually, it’s a revolving line of credit, and you pay back the bank or mortgage company what you use.

What do you mean, the bank can “take it away”?

We found homeowners in Massachusetts and across the country getting letters from their lenders with the bad news. Without warning, the bank is cutting or even canceling their equity lines. One angry borrower told us he had a $57,000 line of credit that suddenly dropped to $30,000. He’s lucky; some lines are getting cut to zero.

They can’t do that, can they?

Oh yeah, it’s completely legal. Look at your loan docs. It’s in there. We talked to banking regulators and experts who say the language in most equity-line contracts is pretty standard. Once you sign on the dotted line, you’ve agreed to rules that often give the bank the right to adjust your loan amount.

But I’ve always paid my bills on time, and I have good credit.

This has nothing to do with your credit score and everything to do with the tanking real estate market. When the bank approved some equity lines, lenders assumed property values would keep going up. Since some are going down, banks say they are chopping credit lines to protect their investments.

Could my loan disappear next?

There’s no real way to predict. Bank officials refused to tell us how often it happens. But we found consumers who are stunned and scrambling for cash. Some are holding bills for home improvements, college tuition, credit card payoffs, gas and even food.

This is going to be financially devastating to me!

Banks insist the cuts actually protect homeowners. If you suddenly can’t make the payments on your line of credit, the bank could take your house. It’s like a second mortgage — your home is the loan’s collateral.

Yikes! I already signed a contract with a contractor for a new kitchen.

If your credit line is cut, you may be able to appeal that decision, especially if you’ve already sealed a deal to spend the money. Call your bank and ask what the process is. {EXA}

Award-winning investigative reporter Hank Phillippi Ryan is on the air at Boston’s NBC affiliate where she has broken big stories for the past 22 years. She has won 24 Emmys as well as dozens of other regional, national and international honors for her work. She is also a best-selling mystery novelist  http://www.hankphillippiryan.com). Mary Schwager is a journalist with more than 16 years of experience and is the investigative producer at 7 News. She’s won more than two dozen awards for investigative, consumer and feature reporting and writing, including nine Emmy Awards, seven Edward R. Murrow Awards and three Associated Press honors. She was also a state-licensed detective and performed criminal investigations on behalf of the Wisconsin Public Defender’s Office. Ryan and Schwager can be contacted at  hryan at whdh.com and  

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