topic Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL.. in Mortgage Loans

ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Takunda1 — Tue, 25 Dec 2007 01:03:18 GMT

I got this from another forum in the OT section., Anyway I know the guy works for WAMU so those with WAMU helocs check to make sure you still have money to spend.

"From what she was told, any home equity customers that had a significant drop in their fico scores are subject to having their loans frozen on the 27th this month at whatever their balance is.

Basically if you have a 100k heloc and a balance of 60k they are freezing you at 60k if you have a drastic change in fico, and you're going to be unable to use that other 40k you "thought" you had.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Tue, 25 Dec 2007 01:15:49 GMT

Not much different than what is happening in all areas of lending right now unfortunately.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Tue, 25 Dec 2007 03:19:21 GMT

That's a smart move regardless...

The home equity loan is based on the equity you have in your home. With the housing costs dropping (or better yet, with the high cost insanity subsiding), that HELOC no longer represents the equity your home has anymore. Rather than dropping the value down to the balance when your scores drop, they should send out an appraiser and drop the loan down to the equity you currently have. Might be lower than your balance!

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

haulingthescoreup — Tue, 25 Dec 2007 04:32:53 GMT

@Anonymous wrote:

That's a smart move regardless...

The home equity loan is based on the equity you have in your home. With the housing costs dropping (or better yet, with the high cost insanity subsiding), that HELOC no longer represents the equity your home has anymore. Rather than dropping the value down to the balance when your scores drop, they should send out an appraiser and drop the loan down to the equity you currently have. Might be lower than your balance!

Feeling pretty happy that although I had the option to ask for up to $125K, I took $50K (USAA.) With the first mortgage, we should be at least $20K under appraisal, even in these shaky times.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

CreditDrama85 — Tue, 25 Dec 2007 16:15:42 GMT

this is ridiculous, as long as payments have been on time...WaMu has no right. if this goes into effect there will def be a class action lawsuit im betting

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Tue, 25 Dec 2007 17:13:05 GMT

CreditDrama85 wrote:

this is ridiculous, as long as payments have been on time...WaMu has no right. if this goes into effect there will def be a class action lawsuit im betting

Lawsuit? Based on what? An issuer has the right to extend ornot to extend credit at any time. They can contract the mount of credit as well. Are you saying that if your scores tank you expect a lender to say 'Oh well'.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

MidnightVoice — Tue, 25 Dec 2007 17:15:32 GMT

Especially as a HELOC is a secured loan, and if the value of the security is dropping..............

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

CreditDrama85 — Tue, 25 Dec 2007 23:20:18 GMT

this is a prime example of why Citi and CapOne will always have my business, you would never hear of them doing any nonsense like this.

and sure wamu could be sued, the debt is secured....the customer's fico score is a mere snapshot at the time the loan is opened.

wamu should have been prepared for the credit crunch. in other words, the lender -in this case-- wamu overextended themself and are freezing accounts that familys count on in FEAR that the customer/family MIGHT do what wamu did? overextend!

haha, give me a break..what a joke.

unless the consumer has been late on the account with wamu , is in credit couseling (that is being reported), or has filed for bankruptcy after the account was opened...wamu is overstepping their bounds BIGTIME

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Tue, 25 Dec 2007 23:55:09 GMT

CreditDrama85 wrote:

this is a prime example of why Citi and CapOne will always have my business, you would never hear of them doing any nonsense like this.

and sure wamu could be sued, the debt is secured....the customer's fico score is a mere snapshot at the time the loan is opened.

wamu should have been prepared for the credit crunch. in other words, the lender -in this case-- wamu overextended themself and are freezing accounts that familys count on in FEAR that the customer/family MIGHT do what wamu did? overextend!

haha, give me a break..what a joke.

unless the consumer has been late on the account with wamu , is in credit couseling (that is being reported), or has filed for bankruptcy after the account was opened...wamu is overstepping their bounds BIGTIME

I guess that would be the same as any other CLD.

Still don't get your logic, A creditor has a right NOT to isue you additional credit at anytime secured or not. If that weren't the case, BofA or anyone else would never decline secured cards. These by the way are securd by whatever amount you put into a savings acciount, **bleep**, for tat.

If you credit pisture chagnes, you can believe that they have a right not to continue letting you suck from the teat. Moreover, they have the right to demand payment in full. I have yet to see any lending agreement that doesn't have built in PIF language.

I don't think nayhone yet mentioned some sort of weird UD, which has been practiced by CC for years, including Citi. I'm not sure aboutthe 'Never hear this sort of thing from Citi or Cap1.'

Cap1's limits a re generally so laughable and the likelihood that you would get additinal credit so slim as to be ridiculous. I have heard of Citi lowering credit lines from changes in the CR. OR raising interest rates. I would most certainly rather WaMu cut off the flow than raise the current interest rates on these loans to 29% or so.

This is just another example of the changing face of lending. As MV said, not onl do they have the right but theor security interest is losing value as well. Moreover, the government has stepped in and told them that the consumers who signed loans for ARMs were temporarily insane and thsoe contracts need to be frozen. GMAB. They base their lending on profit and loss projections. A big part of the profits jsut went out of the window.

One thing about the subprime mortage freeze is that your credit score has to be below a certain number. Easy enough to skew the numbers to get a free ride by missing a few payments. Are they supposed to take it from both ends?

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Tue, 25 Dec 2007 23:56:40 GMT

http://ficoforums.myfico.com/fico/board/message?board.id=creditnews&thread.id=812&jump=true

Grab a HELOC before you're due to reset. Tank your scores and your lender loses out on both ends

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

CreditDrama85 — Wed, 26 Dec 2007 02:50:02 GMT

your analogy of the secured card is not accurate.

what wamu is doing would be like a person opening a secured cc and the account being frozen at 50% of available balance.......

the person has opened a secured CC to secure the debt just as equity in the home is securing the cl.

-the CC can company can take money out of the secured account upon default

-wamu can foreclose upon default

what dont you understand?

if wamu enforces this they may barely be within the scope of the law but sure as h*ll are not ethical

and dont you dare bash citi and capone

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

CreditDrama85 — Wed, 26 Dec 2007 02:56:08 GMT

you also need to understand that wamu isnt refusing to issue additional credit if freezing the account...

they are revoking a previous promise...based on information contained in CRs despite it being a secured debt.

so, if credit counseling--bankruptcy--and late payments on the wamu account specifically are not the reason for freezing the account but other items on CR...it is bias and depends on how the underwriter feels on the day of review

get that? try that on, brammy

Message Edited by CreditDrama85 on 12-25-2007 06:56 PM

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Wed, 26 Dec 2007 22:40:38 GMT

CreditDrama85 wrote:
your analogy of the secured card is not accurate.

what wamu is doing would be like a person opening a secured cc and the account being frozen at 50% of available balance.......

the person has opened a secured CC to secure the debt just as equity in the home is securing the cl.

-the CC can company can take money out of the secured account upon default
-wamu can foreclose upon default

what dont you understand?

Ever heard of apples to oranges?

An HELOC is extended based on the available equity you have in your home. Home costs $200k, you pay $20k down and have a mortgage for $180k, make the kitchen look fab and increase the home's value to $215k, you have equity of $35k. The bank then decides how much of of a HELOC they want to extend to you based on the equity you have in your home and your credit worthiness (FICO score).

A secured card is secured by a value of USD in an account (in this country) and the secured line of credit is up to this value and is also in USD. Oranges to oranges. You default, they take your secured amount. Everyone's happy, except you of course.

An HELOC is secured by a value in USD that does not stay constant because the security's value is exclusively dependent on the Real Estate Market in your area. Apples to oranges. As is going on in several areas, housing values are falling. So where you may have had $35k in equity, 2 years later your equity may only be $25k. (New value 215k, mortgage of 180k, 10k paid on principal over first two years, home's value falls, new value is 195k which equals 195k+10k-180k or 25k in equity)

If you over extend yourself and use all 35k of your HELOC and default, the bank can sell your home and if by some fortune, they are able to get market value for it. They have to settle for 25k. Hence the HELOC was really not secured past 25k. They lose 10k if they can't come after you for it.

Providing this loan based on a security is all they are ethically obligated to do. If the security is still there and has value that is above the balance then, ethically, they should not bring your limit below the balance. However they are not ETHICALLY obligated to extend you an unsecured loan. If the loan is secured by property that has a risk of losing value, by allowing you to teader todder at the upper limit of your HELOC they are putting you in a position where you may ultimately be borrowing more than what the loan is secrued for in actual USD. Ultimately, based on your credit worthiness which is measured (thats a bad word because you can't measure that) by FICO, they can also see if they are running the risk of putting themselves in a situation where you will default and they will lose money on a security that has lost value.

Ethically, they cannot run their business into the ground. They need to analyze the risks and redistribute the monies where necessary. So they should be able to lower the Limit of your HELOC based on home's value and on your probability to pay back a loan which is measured in today's world by FICO.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Wed, 26 Dec 2007 23:04:02 GMT

A Home equity line of credit is a line of credit UP TO the value of your home. There is no guarantee that you will even be approved for a line for the total amount of equity in your home. And yes the secured CC analogy does apply. If a lender does not like your FICOs with a secured card, they always have the option of closing the account, keeping the amount of the secuirty to offset the balance and refunding the rest.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

CreditDrama85 — Wed, 26 Dec 2007 23:49:35 GMT

it is official, you work for wamu.....

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Wed, 26 Dec 2007 23:53:32 GMT

CreditDrama85 wrote:

it is official, you work for wamu.....

LOL!! I can't even get a CLI this go round!!!! Do I deserve it,,, I think so! Do they HAVE to give it to me? No!

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

ShanetheMortgageMan — Thu, 27 Dec 2007 02:21:11 GMT

I have to side with Brammy on this... if you read through your loan documents you'll read where the lender can adjust the limit on your HELOC. This isn't just WaMu, I've had calls from various clients who live in declining markets which have had their HELOC limits cut... some have maintained their A+ credit as well. Citi, WaMu, GreenPoint (Capital 1), Countrywide, US Bank, Wells Fargo have all done it to name a few.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Thu, 27 Dec 2007 02:31:34 GMT

The problem is that we as Americans have gotten so used to the easy lending that came in the wake of the housing boom and economic growth, that we as a people have come to expect it as a right. No lender HAS to loan us anything. They do because that is the business that they are in and as long as it is profitable they will continue to do so. With the economy being on the verge of a recession with the weakening dollar and the credit crunch, the risks are greater so the lending is tightening. One reason I app'd more than I ever have this year and now is the time to hold 'em.

Message Edited by Brammy on 12-26-2007 09:31 PM

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Thu, 27 Dec 2007 18:27:47 GMT

Brammy wrote:
A Home equity line of credit is a line of credit UP TO the value of your home.

If that is not the stupidest idea I ever heard in my life. They will lend you UP TO the value of your home?! Very few people in this country own their home. Banks own homes, people who've finished paying their mortgages own homes ... so why would they lend someone money based on the value of a security they don't own?! I always thought that a HELOC was a line of credit based on an individual's equity in a property. That is risky business. I thought they were smarter than that. No wonder they are all folding.

P.S. I'm not saying Brammy is stupid nor am I calling him stupid for making that comment. I am saying that the idea that a bank would engage in the practice of lending someone money and securing it with a peice of prperty that the individual does not even own is stupid.

Re: ATTENTION! IF YOU HAVE A WAMU HELOC..BE CAREFUL..

Anonymous — Thu, 27 Dec 2007 18:28:42 GMT

Brammy wrote:
The problem is that we as Americans have gotten so used to the easy lending that came in the wake of the housing boom and economic growth, that we as a people have come to expect it as a right. No lender HAS to loan us anything. They do because that is the business that they are in and as long as it is profitable they will continue to do so. With the economy being on the verge of a recession with the weakening dollar and the credit crunch, the risks are greater so the lending is tightening. One reason I app'd more than I ever have this year and now is the time to hold 'em.

Message Edited by Brammy on 12-26-2007 09:31 PM

AMEN!