Fed offers tips for HELOC lenders and borrowers
Published November 1, 2009 | November 2009 issue
A new publication from the Board of Governors of the Federal Reserve System offers guidance for lenders and borrowers of home equity lines of credit, or HELOCs. The guide, titled 5 Tips for Dealing with a Home Equity Line Freeze or Reduction, explains the rights and responsibilities of lenders and borrowers when a HELOC is reduced or frozen. By law, a lender may reduce or freeze a HELOC, regardless of whether the borrower has made timely payments, but must promptly notify the borrower of the cause of the action. Common causes include a drop in the value of the home or a change in the borrower's financial situation. The 5 Tips guide encourages borrowers to contact their lenders in the event of a reduction or freeze and ask what steps can be taken to have the HELOC reinstated. The new guide complements a previous Fed publication titled What You Should Know about Home Equity Lines of Credit.