About 6 hours ago I posted that banks do what is good for them, and they don’t care about you. As if to help me prove my point, we now have an article in the LA Times that was put on it’s site 2-½ hours ago entitled “Trying to tap into home equity? We'll see.” This article tells us that Countrywide has sent letters to 122,000 customers telling them that they can no longer tap into their home equity lines of credit (HELOCs) because the values of their homes have decreased too much.
No warning letters Countrywide? No heads up? No, “Hey loyal customer, you might want to consider that you are going to need to find new sources of cash soon”? Gee whiz, that’s rather cold and businesslike.
The article goes on to say:
The move by Countrywide, the nation's largest mortgage company, is part of a pullback by lenders nationwide on home equity loans, which are often used to finance home improvements and consumer spending. Such loans, also known as second mortgages, were widely available until six months ago, when delinquencies and foreclosures began to soar. Now, with new evidence of sinking home values, many lenders are requiring that homeowners maintain a much larger percentage of equity in their homes as a cushion against financial problems.
The tightening of credit could help limit the effectiveness of interest-rate cuts by the Federal Reserve and an effort by Congress and the White House to put more money in the hands of Americans via tax rebates and other economic measures.
Lessons learned from this post:
a) The Bank is not your friend
b) The Bank is very worried about falling home prices
c) The Man (Fed + President + Congress) can’t do much to stop this train wreck.
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