Wells Fargo & Co (NYSE: WFC) and other major banks have been continuing to cut or reduce home equity lines of credit because they are frightened that consumers will default, and it seems that the problem of banks cutting credit lines is beginning to accelerate.
According to the Chicago Tribune, Some banks have even gone as far as cutting HELOCs right after they have been issued. Strange circumstances like that indicate that banks have begun cutting home equity lines of credit via geographic location or via zip code, which is in violation of federal law.
Banks are required to do individual assessments of your line of credit and base the cuts on something specific to your home loan rather than a broad based cut. Banks have stated that they are now doing individual computerized assessments, but some consumer advocates believe that those assessments are much more cookie-cutter than the banks would like anyone to believe.
If you have a home equity line of credit and want to draw on it in the near future, your best bet is to take out the money now and deposit it at another financial institution. It’s important to move all other accounts away from the company that you have the HELOC with because some banks have been seizing funds from your other accounts in the event that the bank decides to shut down your home equity line of credit or call the loan due.
