Are you breaking up with me?

Is your lender breaking up with you? I mean... terminating the relationship between you and the equity in your home? This may come as a surprise to some of you, but if you have an open Home Equity Line of Credit (HELOC), don't assume that it's still open.

It may have been closed by your lender. Yes, that's right... Lenders are closing HELOC accounts, especially in areas deemed as distressed markets; areas where the home prices have fallen in value 10% or more.

So, if you have a HELOC that you were planning to use for financial emergencies or rainy days, you may want to rethink your contingency plan.

Consider this experience from Mortgage Rates Reports (full report here):

I don't quite know how to write this because I've never had to do it before. In 14 years of mortgage lending, I have never seen banks treat their good San Diego customers this way. As you probably know, many big banks and mortgage companies have

TERMINATED THE RELATIONSHIP

and closed the home equity lines of credit to San Diego County homeowners. Apparently, Countrywide did just that last week. They spun the whole thing as the "Preserving American Home Ownership" initiative but you and I know that the only homeownership they were saving was their employees'. I must admit, those banks and mortgage lenders did some pretty stupid stuff these past few years. They made loans to anyone who could fog a mirror based on the idea that home prices would skyrocket faster than a thermometer in the Arizona sun. Well, we all know that what goes up... comes down (and goes back up again) so you're probably in as much in shock as I was. Let's face it, the banks ....

If your HELOC has been closed, CNN Money wants you to know you can fight back. Consider the excerpt from their article When a HELOC freezes over:

If your HELOC is on ice

Fight for a defrost. The letter from your lender should explain why the line was suspended and how to appeal. Some banks use automated processes to identify troubled markets.

To prove that your house hasn't been affected, ask a realtor to pull prices for houses sold within three miles in the past six months, ask your mortgage originator to intervene, or have your house reappraised. The latter can run $400, but if you were counting on the line, it may be worth it. ....

My Thoughts

This kind of behavior from banks will no doubt contribute further to the foreclosure epidemic we've seen as of late; because for some, their HELOC was the last line of defense against the unexpected surprises that life tends to throw at us.  The government will try to intervene, but as I've said before, this crash was inevitable, and there's no stopping it until we reach the bottom.