HELOC's WTF?

G8rMom7 · Post by **G8rMom7** » Tue Aug 05, 2008 10:33 pm

My parents were turned down for a HELOC...they don't have a mortgage and own their house outright. They were told by the bank that even though both of their credit scores were over 800, because they don't own the land their house is on, they can't get a HELOC. They live in one of those retirement villages where you buy the house but you get a 99 year lease for the land. But they only want around $50K which is much less than the house is worth...even without the land figured in.

And I'm having trouble getting a HELOC too. I got my house professionally appraised and it came in at $222K...on a whim, I went to my credit union to see what they could do. They said they couldn't use my appraisal because it was over 30 days old and it wasn't one of THEIR appraisers (even though this guy was seriously conservative). They would only give us $190 for the house without ANOTHER appraisal (for $275 to be paid by us). That was less than we got for it when we applied with for our other HELOC with Wachovia almost 5 years ago (before the bubble).

Anyway, I asked if they would even just take over the Wachovia HELOC with a fixed interest rate...our Wachovia is an adjustable rate and I don't like it. They said I would need to get the house appraised at around $200K to get the other HELOC approved. What I don't understand is that our mortgage is now around $153, and our current HELOC is around $32K...that's $185...why do I need to have the house appraised at $200K. And to get an extra $20K to do the work we want to do to expand our living space, we would need it appraised for $220K.

What happened to that other $15K? Don't tell me it's closing costs. Is it interest? I hate this chit.

I think we are going to go the route of getting a small business loan which I think will be easier to do...using it to pay off some of our debt (because most of that debt was caused by loans to the business so we could pay ourselves). Argh.

annarborgator · Post by **annarborgator** » Wed Aug 06, 2008 12:21 am

Things are tight right now for banks. Even the small business loan may be hard to come by...banks just aren't lending much money right now to anyone for much of anything. It definitely sucks. They need to shore themselves up right now; they don't feel comfortable extending themselves further given current conditions. It sucks and it makes me worried as hell about finding a job next year.

a1bion · Post by **a1bion** » Wed Aug 06, 2008 8:32 am

Banks ain't giving HELOCs out to anybody these days, just about. They gave them out like candy for several years and people were using their houses as ATMs. Now the credit market is locked up and they've shut that market down. Sucks for decent people like you and your mom, Ali. I'll find and article I was reading about it awhile back and post it for you if I can.

a1bion · Post by **a1bion** » Wed Aug 06, 2008 8:48 am

Here are two links to one of my favorite finance websites which both address this subject:

http://calculatedrisk.blogspot.com/2008 ... elocs.html

http://calculatedrisk.blogspot.com/2008 ... elocs.html

TTBHG · Post by **TTBHG** » Wed Aug 06, 2008 8:54 am

http://www.msnbc.msn.com/id/26051579/

updated 1 hour, 24 minutes ago
Morgan Stanley told thousands of clients this week that they will not be allowed to withdraw money on their home-equity credit lines, Bloomberg News reported Wednesday, citing a person familiar with the situation.

Most of the clients had properties that have lost value, the agency reported, citing a person who declined to be identified.

The second largest U.S. investment bank will review home-equity lines of credit, or HELOCs, monthly from now on, the agency said, citing the person familiar with the matter.

Morgan Stanley did not immediately return a call seeking comment.

In June, the investment bank said its quarterly earnings dropped 57 percent on weak trading, investment losses and a slowdown in investment banking, even after it realized $1.43 billion in one-time gains.

G8rMom7 · Post by **G8rMom7** » Wed Aug 06, 2008 10:08 am

Yeah, this is what I figured. I didn't think the small business load would be as much of a problem because 1. We don't need too much and 2. We can show them how much we billed and they can see the kind of organizations that we bill and I'm pretty sure they'd see they will get their money back. It's not what we THINK we will sell, it was stuff we already sold...we just need to collect on it and we want the small business loan to FIRST pay back our vendors if we don't collect from our schools on time. But since last year we were able to pay the vendors on time without the loan, I'm hoping that we will be able to use the loan for paying ourselves back the money we put into the business.