HELOC ( Home equity lines of credit) loans have been sort of a helping hand to homeowners who were looking for a way to finance home improvements or repairs, pay off other debts, or use as a emergency line of credit. However, now, these HELOC loans are ruining the financial lives of some homeowners. Falling home and property values and a rising number of delinquencies have caused many mortgage lenders to temporarily freeze all HELOC loans, taking away some homeowners only source of backup. Simply closing huge lines of potential credit borrowers rely on can ruin a homeowners credit score. Lenders typically have targeted locations where property and home values have dropped the most. However, these are typically the homeowners who require the most help.

Worried about not having access to a HELOC? Are you too risky for your mortgage lender?

It used to be that banks and mortgage lenders were more than happy to approve HELOC loans while real estate was hot. Now though, they are desperate to scale them back as much as possible and looking for any possible reason to do so. Foreclosing on a delinquent HELOC loan does not usually make financial sense for a mortgage lender. Cutting or nearly stopping all HELOC loan applications is a sure way to minimize their risks and make sure that the homeowner does not get too behind in debt and not afford his mortgage loan. In cases where the home is not worth as much as the mortgage the lender would lose money should the borrower default on their mortgage. Add to that the fact that mortgage lenders do not make much money off of a HELOC loan to begin with. The tight competition keeps lenders rates in check and generally in line with other mortgage lenders, keeping their profits just high enough to compete. Now though the banks that manage the HELOC loans are keeping tabs on them the same way they do credit cards. They track overall customer payment behavior, delinquencies, or any negative remarks on their credit rating. They may even reduce or close other lines of credit should the borrowers debt to income ratio not meet certain standards or the borrower has less than 20% equity in their home.

Patience and research are the best choice when looking for a HELOC loan. They are not impossible to get but sometimes may require a little more work on your part to find.


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