More on HELOC Situation

Recently we wrote about Chase’s approach to getting rid of it’s WAMU Home Equity Lines of Credit (HELOCs).  This is not much different than what banks are doing to their credit card customers.  (See yesterday’s blog post.)  Basically, banks have now decided that their interests in lending are no longer aligned with their customers’ interests in borrowing.  Not a good situation if you are the borrower.  Because banks are throwing all these curve balls, we are trying to keep up with them and keep our community aware of what’s going on.  Hopefully, armed with this information consumers can plan accordingly.

Here is what we found out about how Chase is handling its HELOC customers.  If Chase decides the price of your house has dropped since getting your loan, they have been freezing and suspending lines of credit.  The equity in the home or your payment history is not being considered when making their determination.  The trigger is simply whether the home value has dropped since getting the loan.  There is no way to find out how many people are affected, but it seems this approach would include just about everybody.  For instance, let’s say you have a home that was worth $600,000 but is now worth $500,000 and have a $200,000 first mortgage and a $200,000 HELOC, because your value dropped they have frozen the line of credit and reduced the line to zero.  Even though you have $300,000 in equity they will not allow you to access your line of credit.

If you are stuck in this situation, Chase has laid out a path to unfreeze your HELOC.  They are putting the burden on the borrower to prove that the value of the house still supports the original loan.  If you pay several hundred dollars for an appraisal using their appraiser and the value of the house supports your loan on its original terms, our understanding is they will reinstate your loan.  (Better hope they don’t bring in your appraisal at $495,000.)  We are not sure of the full conditions for reinstatement.   But you also need to be aware that they may again suspend or freeze your credit line if they again deem it appropriate.

If their appraiser does not value the house at an amount sufficient to reinstate the loan in its entirety, they may offer to reduce the line of credit to an amount that would leave 40% equity in the home.  Using the situation above, if your home is appraised at $495,000 by their appraiser and your first mortgage is $200,000, your HELOC could be modified to $97,000 giving you a combined loan to value (CLTV) of 60%.

Previously, WAMU had lowered credit lines to about 65% of a very conservative valuation of the home.  Many of their HELOCs have 40% or 50% equity above the loan.  So it seems risk avoidance is not driving Chase’s decision.  What may be at issue are that many of the loans held by WAMU customers currently only pay 2.75% or 3% interest.  Chase is currently charging 4.5% to 5.75% for these same loans.  Chase is not forthcoming with its motivation, only saying they are within their rights.


9 thoughts on “More on HELOC Situation”

  1. We just got our letter. $100k credit line cut to $16,300 because “our property value dropped more than 5% of the value appraised when the loan originated”. Supposedly down from $502k down to $466k. Both figures according to various customer service reps I’ve spoken with, and this latter figure according to the bank’s underwriters.

    However, even if I agree with these figures, this still means that we have $186k in equity. A loss of only 16%. But I don’t agree with those figures, at least not this supposed $502k valuation at origination.

    Having now found our copies of the docs for our 2003 refi, I see $470k as the valuation at origination, only a 1% change in value from the $466k valuation they are now claiming. At this valuation, under Chase’s own arbitrary threshold of a 5% or greater loss, we should have never been a target for this kind of reduction.

    Naturally, I’ve demanded copies of the original, signed, loan docs. I want to see this supposed $502k valuation, in writing and with our signatures attached to it.

    It is my contention that this $502k valuation is either a mistake or has been manufactured to make our house seem like it’s worth less by a factor greater than 5%. Frankly, I’m more inclined to believe it to be the latter.

    It is my further contention that, in our case, Chase is in violation of the Truth in Lending Act, Regulation Z, because we do not have a significant decrease in the amount of equity we have in the property. In fact our equity has INCREASED from $119k to $186k since the origination of the loan, due to loan pay down.

    Not that it matters, since the stated reason for reducing the HELOC in our case was the property value, but we have also not had any significant changes in our financial circumstances and we are not in default on any of our obligations.

    Actually, we should be ideal customers as far as Chase is concerned – we have pretty high credit scores; a decent and steady income; no debt of any kind other than the notes on the house ($267k on the first and $15,400 on the HELOC); no expenses other than normal monthly ones; and we even own another piece of property outright (valued at approximately $250k).

    If people like us are loosing their access to credit, then I really can’t see any hope for the economy at large.

    We are demanding, through our lawyer, that Chase reinstate the higher credit line on the loan, or at the very least agree to a credit limit that is more acceptable to us ($16,300 is not acceptable).

    We have also filed complaints with the OCC and the FDIC.

    Many people would just say let it go, and find a HELOC elsewhere. But it’s not even so much having the full credit line restored. It is more about what the reduction in available credit could possibly do to our credit scores. Oh, yeah, and they pissed me off! I think these guys have a bloody cheek, especially after taking a bunch of bailout money from the government.

  2. Michael –

    Chase has suspended our line as well. Our HELOC was originally with Washington Mutual, and the rate is fantastic. (currently 2.75%). Are you also a former WAMU customer, and did your HELOC have a great rate? I think we are being targeted because of the rate we have, not because of any legitimate change in financial circumstance.

    We have 800+ credit scores, unchanged income, and 80% equity in our home. Chase was unable to claim a decrease in property value with us, so instead they requested a 4506 form to order a transcript of our tax returns from the IRS. We sent the completed forms to them promptly, but they claimed they never received them and therefore our HELOC is frozen. We faxed them a second copy from a Chase branch on April 1st. I filed a freedom of information request with the IRS, and it turns out Chase submitted a transcript request on March 30th. THIS PROVES THEY ARE LYING about not receiving our original form. They will do anything to get away from the great rates we have on our WAMU HELOCS, even if it means operating outside current banking laws. Our HELOC has been frozen since March 23rd with no reasonable explanation as to why, or any answers as to how long it will be frozen. We also filed an OCC complaint.

    Please post an update on the result of your appeal. I know they are operating outside of the law, but if no one calls them on it the laws are useless. Post back if you here of any class action to join.


  3. Yes, WaMu customers. HELOC at 3.5%.

    I called the bank one last time this Monday just gone, and finally got to speak to someone who would at least listen to sense. After going through my whole schpeel about how I thought that Chase was “mistaken” about my home value, and how I considered them to be violating the truth in lending act, he agreed to request a reinstatement. I made sure he understood that, from my perspective, it was more a demand than a request. I should find out the outcome in a couple of weeks. Funny how it only took a day to turn it off, but three weeks to get it back!

    I’m at a conference this week, where talk of this kind of thing has been a big part of dinner converstation (along with the Swine flu). I spoke to one guy that Chase cut off because they didn’t believe he lived in his house! This is just crazy stuff, and I frankly don’t know how they’re mangaging to get away with it.

    I’ll report back on this battle, once I’ve found out where I am.

  4. Update:

    It appears the request for reinstatement has been summarily rejected. On the plus side, I suppose, it didn’t take the 3 weeks I’d expected.

    Still not finished fighting though.

  5. Pat,

    Every chance this will go to Class Action now. Already talking to an attorney, as a matter of fact. Please contact me – mwalsh (at) smad. com

  6. Quote from Michael J. Walsh above:
    “Many people would just say let it go, and find a HELOC elsewhere. But it’s not even so much having the full credit line restored. It is more about what the reduction in available credit could possibly do to our credit scores. Oh, yeah, and they pissed me off! I think these guys have a bloody cheek, especially after taking a bunch of bailout money from the government.”

    Michael, I will one up you, I,m ready to go door to door and get signatures. I have access to talk radio and meeting halls. I am ready to assist in a class suite. I will organize others to use these tools. I want these thugs to pay for their inability to function because of their rampant corruption.

    Oh, yeah, I’ve gone commando!

  7. I am so fed up with Chase that I could scream. And I have. I am grateful that I didn’t count on using the HELOC for medical
    purposes or for tuition. I took out the HELOC in late October 2008, and only wanted a $100,000 LOC for a home remodel.
    Completed the landscaping and the county even decalred my home IMPROVED. I have supplemental taxes to pay.
    My original mortgage is $362,000 and the property was valued BY A CHASE APPRAISER – TWICE at a low $789,000. (I live by the
    beach.) They gave me a HELOC for $139,000 which is as far as they would go for the same low rate. OK by me cuz it was more than
    I wanted anyway. I used $25,000 of the HELOC. They sent me a letter of the suspension a week after they stoned my account.
    Glad I didn’t have any checks out from the account. They didn’t tell me how low they thought my home was now.
    They will reinstate the suspension if I pay their appraiser again for the appraisal. Sounds like a fee scam to me. However, now
    I can’t complete other projects and I certainly can’t help tio stimulate the economy and put people to work. I think this was the
    reason these banks got bailed out. I’ll join a class action. This is ridiculous. I have more than $400,000 in equity and can’t
    use it at all. What are the chances this will be reversed automatically and how do I go about getting a new HELOC with this
    hanging over my head?

  8. Today I sent the following letter to the JP Morgan Chase & Company Board of Directors. You may find it interesting.
    October 27, 2009 BY CERTIFIED US MAIL

    JP Morgan Chase & Co.
    Office of the Secretary
    270 Park Avenue, 38th Floor
    New York, New York 10017

    Dear Members of the Board:

    As a JP Morgan Chase stockholder and as a customer of Chase and WAMU, I am writing to you to bring to your attention numerous unfair, immoral and unethical business practices and policies, possibly even fraudulent practices, within Chase Bank and WAMU regarding home loan customers and credit card holders.

    Customer care, good will, and trust have become nonexistent between Chase and your home loan and credit card customers. You run rough shod over your customers in ways that exhibit evil, avarice and greed beyond compare. You are an organization without any morals or ethics – an organization that demonstrates no “customer care” whatsoever. You are hurting people in ways you cannot imagine and thus hurting your investors and damaging Chase’s own future. You are not dealing in good faith with your customers.

    I am a sixty-three year old Vietnam War widow, mother and grandmother. I work as a mediator and own a small bed and breakfast business. I have worked hard all my life. I have always done my best to meet my every financial obligation in a moral and ethical manner. I have been a long time customer of Chase bank as a home owner having a WAMU first and a Chase HELOC, and as a credit card holder. Like the majority of Americans – and the majority of your customers – my finances have been deeply impacted by the economy. I am struggling with my mortgages with Chase and WAMU and credit card debt. Up until a few months ago I had NEVER been late on a payment nor had I ever missed a payment. I had truly been a good paying customer of Chase and WAMU. Unfortunately the recession has deeply impacted my life and I am trying to save the home I have owned for thirty-seven years. I have tried my best to work out something with Chase. I am now at my wits end – as are countless other customers of your bank due to the banks unfair and immoral policies and practices.

    Chase has and continues to generate bad will towards you customers through the following policies, procedures, and behavior:
    1. WAMU and Chase Home Equity Lines of Credit (HELOC) teams make repetitious, redundant requests for documents, often within a few days of one another, for modification of first mortgages and/or HELOCs. (I.e. I have provided the same set of documents four times within one month.)
    2. WAMU leads customers to believe that Notices of Default will be rescinded when the customer enters into a “trial modification agreement” with the bank and then never files the rescinded documents with the County Recorder.
    3. WAMU does not provide customers with updated statements after receiving payments according to the terms of their trial modification agreements.
    4. Customer must send payments by Federal Express and certified check during the trial agreement even though customer has never given a bad check to the bank at any time.
    5. Unfair and unbalanced methods in filing Notice of Defaults on your customers’ homes. [For example I missed three payments and you filed a NOD on me, when other bank customers have missed twelve or more payments and no NOD has been filed against their property.] There seems to be neither rhyme nor reason, leaving one to believe that perhaps some bank officer wants the customer’s home for himself or herself as happened with a well-publicized case involving Wells Fargo Bank.
    6. Threatening customers with imminent foreclosure sales when requesting updated documents for home loan modifications — implying a date for a foreclosure sale has been established when it has not in fact been set and when a trial modification agreement is in force – and even when the customer has fully complied with every payment as agreed and every document request. Or implying that the trial modification is in danger.
    7. WAMU and Chase utilize blanket form letters to request documents that may or may not have any bearing on a customer’s individual situation.
    8. Unfairly jacking up credit card interest rates to 29.9% without due cause just because you could do so – thus forcing customers into default, late payments, or bankruptcy.
    9. The HELOC home loan representatives negotiate oral trial modification agreements with customers then never provide customers with a written trial modification agreement, thus rendering the customer’s understanding of the agreement null and void. The customer has no proof of the terms to which he/she agreed, thus rendering the trial agreement unenforceable. This is probably fraudulent behavior.
    10. Unclear terms (oral terms) on HELOC trial modifications – not dealing in good faith with your customers.
    11. HELOC collection calls made on a daily basis to the customer even though the customer has made payments in accordance with the so-called (oral) trial modification agreement.
    12. HELOC collections personnel have no knowledge that a customer has a trial modification agreement in place.
    13. Failure of the HELOC team to notify your customer in writing or otherwise if the application for modification is declined.
    14. HELOC team declaring that a person is not paying as agreed after they enter into a trial modification agreement with customer and customer fully complies as agreed.
    15. HELOC collecting people making threatening calls to customers during the period of the trial modification.
    16. Continuing harassing collection calls from credit collections beginning at 8 o’clock in the morning up until 9 o’clock at night, seven days a week, numerous calls all day long.
    17. Chase HELOC collections call customers even when trial modifications are in place and all terms have been met to date.
    18. Collection representatives (foreigners and Americans) who lack proficiency in the English language and have no ability or desire to resolve any issue, who follow a script, and who deal in an antagonistic fashion with customers.
    19. Collections representatives who are from India, Pakistan, Mexico, and other third world nations. They cannot be understood. They cannot answer questions. They cannot negotiate. They speak to customers like we are animals, showing no respect nor “customer care.”
    20. Rudeness and mean-spirited behavior by your collection representatives.
    21. Collection agents who refuse to provide customers with their name and identifying employee number or information, as required by law.
    22. Collections agents who refuse to give out even the most basic account information such as the account number, balance, interest rate, or payment requested – as often as six times in one call.
    23. Collection agents who use abusive tones of voice and language with customers.
    24. Collection agents who demonstrate racist behavior towards Caucasian customers speaking to them in a surly and disrespectful manner.
    25. Collection agents who are uneducated and cannot negotiate or reason on any level.
    26. Collection calls that are meant purely to harass your customer.

    On a personal note let me share with you my situation. In July 2009 I made an appointment to come into a Chase Home Modification Center in Oakland, California, to present my application for loan modifications on my WAMU first mortgage of $1,247,000 and my Chase HELOC of $198,000. The bank officer did not note the appointment or our conversation in my file so Chase immediately moved to begin foreclosure proceedings on my property (a home I purchased with my late husband’s Veterans benefits and that I have owned since 1972). This caused and continues to cause me unbelievable stress. I obtained a trial modification with WAMU and have complied with every request and every payment as agreed; and I obtained a trial modification with Chase on the HELOC and again complied with every request and every document as agreed. I have given up trying to deal with Chase on my credit card issues. I still do not have a permanent modification in place on either the WAMU first or my Chase HELOC.

    I have been subjected to non-stop, daily credit collections call on my HELOC, even though I have complied with every payment. When I have called Chase HELOC customer care, my calls have been set into the ethers. I finally used money reserved to pay my medical bills to bring the HELOC current though according to the trial modification agreement it was current. I have been treated with utter scorn, disdain, and disrespect even though I have done my very best to cooperate with Chase and to make my trial payments as agreed. I feel utterly harassed by Chase Bank and your collection people; so much that I sent a “cease and desist” letter to HELOC collections.

    Chase’s policy of harassment and besieging the customers is not helping Chase Bank. It is not helping your customers meet their obligations. It does not engender good will or make for good “customer care.” If your customers could pay, they would. No one wants to be subjected to the hell that you are raining down on your customers.

    May God forgive you for the evil you are perpetrating on your investors and your credit customers.

    May God provide a way for me and your other countless customers to be free of your unethical policies and practices and for us to be able to retain our homes and peace of mind.



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