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Tips On "Thawing" A Frozen Home Equity Line
(NAPSA) - Learning that a lender has put a freeze on your HELOC can be a chilling experience. Fortunately, there are steps you can take to protect yourself. Here are some tips from the experts at the Federal Reserve Board.
A home equity line of credit (also called a HELOC) is a loan that uses a borrower's home as collateral. Unlike a conventional home equity loan, however, the borrower does not receive the entire sum up front. Instead, the loan comes in the form of a line of credit. The interest rate on a HELOC can change over time.
Generally, lenders are permitted to freeze or reduce a credit line if the value of the home "declines significantly" or when the lender "reasonably believes" that you will be unable to make your payments due to a "material change" in your financial circumstances.
If this happens, you may want to talk with your lender. Find out what caused the lender to freeze or reduce your credit line and what, if anything, you can do to restore it. Ask your lender to have your HELOC reinstated. You may need to put this request in writing. You may be able to provide additional information, such as information on home improvements that increased your home's value.
You may want to get copies of your credit reports to make sure all the information in them is correct. If the conditions that triggered the freeze no longer exist, your lender must reinstate your credit privileges.
You may also want to shop around for another line of credit. If your lender does not want to restore your line of credit, shop around to see what other lenders have to offer. You may be able to pay off your original line of credit and take out another one. Keep in mind, however, that you may need to pay some of the same application fees you paid for your original line of credit.
To learn more, visit www.federalreserve.gov/consumerinfo. If you have spoken to your lender about a freeze or reduction in your HELOC and did not get a good response, call Federal Reserve Consumer Help at 888-851-1920.
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