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Consumer
Tips to deal with frozen or cutback HELOCs
WASHINGTON (8/7/09)--The Federal Reserve has released a guide to help homeowners deal with home equity lines of credit (HELOCs) that have been frozen or reduced because of the economy. Its "5 Tips for Dealing with a Home Equity Line Freeze or Reduction" explains consumers' rights and lenders' responsibilities when credit lines are reduced. It also provides information for those seeking to have a credit line reinstated. The tips explain that lenders can lawfully reduce or limit a consumer's line of credit regardless of whether the consumer has made timely payments. However, the lender must send a written notice of the action no later than three business days after the action goes into effect. The notice must include information about any other changes to the HELOC. The notice should include specific reasons for the modification ot the HELOC's terms. The most common reasons are a decline the home's value or a change in the borrower's financial circumstances. Understanding why the amount is frozen may help you take steps toward reinstating the original amount. For example: the lender may not be aware of significant home improvements that increase the home's value. If financial circumstances have worsened, look for ways to rebuild the credit rating. Protect your credit history by acting responsibly and contacting the lender immediately if you have questions about a freeze or reduction. Lenders must reinstate the credit privileges when conditions that caused the freeze or reduction no longer exist. The five tips include:
* Read the notice your lender sends you. * Call your lender. * Learn why your lender froze or reduced your HELOC. * Ask your lender how to have your HELOC reinstated. * Remember that your lender can impose fees for reinstating the HELOC.
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