Countrywide Shuts the Doors on Customers
In recent weeks my instincts were telling me we will soon get news from the big lenders of home equtiy lines of credits that they are cutting off future draws on those lines.
Well, in a conference call this morning with a client this premonition was confirmed by facts. This individual has a Home Equity Line of Credit (HELOC) with Countrywide and just received a letter from them stating that due to declining market values of real estate they were shutting the doors for any future draws on his credit line. Say what?
This isn't a bad credit, subprime borrower. No sirree. We are talking about an A credit, great job borrower whose financial liquidity has just been dramatically cut. That home equity that was so readily available in recent years is now stagnant & unattainable unless he decides to sell his property. He didn't see that one coming!
So, what should YOU do?
Well, if you have a big Home Equity Line it is time for an assessment of your financial liquidity, i.e. how much cash can you get your hands on should you need it. How many months in cash reserves do you have? If you've always felt that your home equity line was as good as cash in the bank the current reality is that it IS NOT! The only thing as good as cash in the bank IS cash in the bank.
You might want to consider drawing cash out against your line and parking it in a safe savings or money market account while we weather a few years of declining market values. Yes, you might incur some interest expense but is your financial security worth it? Is your peace of mind worth it?
All of these dramatic changes underscore how your mortgage financing is so much more than just a rate. It needs to be structured best to protect your financial liquidity and security.
One final point. If you have a Home Equity Line of Credit with Countrywide the doors will likely be shutting on your line very soon. Consider this a heads up.
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