bentleyWIRE | blogged

    The main goal of our blog is to inform, educate and provide real world knowledge that can ultimately improve our clients' standards of living.  So, without further ado, I have some great info paired w/ some exciting news that will save you money.

    This morning, I contacted Citibank at 1-866-583-2358 re: my HELOC and the many news stories about lenders freezing access to funds. The call agent (Sarah), reluctantly confirmed that Citi is indeed freezing HELOCs based on a computer algorithm which she's not privy to. You can assume it takes into account homes in declining markets, AVMs (Automated Valuation Models) and total credit extended vs current market value. In addition to Citi, there are reports that Countrywide, Chase, IndyMac, BofA and others are all doing similar freezes. So be sure to plan accordingly if you know you'll need these funds within 1 or 2 yrs!

    On a separate note, I always try to make all phone calls as productive as possible, so I asked if they would reduce my existing interest rate on my HELOC. I was asked to hold while she checked to see if something could be done for me. In a minute and to my utter surprise, she returned stating that "as a good customer w/ excellent payment history" she was able to approve a 0.50% reduction to my rate. She went on to state that I'm eligible for a rate reduction/modification up to 0.50% each year until I get to Prime minus 0.50%.

    Moral of the story? It never hurts to ask for something even if it seems outlandish. It seems rate modifications are no longer reserved only for those in dire need of assistance.  Instead, lenders may currently be willing to provide these even to those current on their payments in an effort to be proactive in keeping defaults at bay.

    As some of you may be aware, many lenders are actually freezing access to HELOCs.  A bankrate.com article written by Leslie Geary explains it well.  In essence, lenders have had a brutally rough time managing their balance sheets and this is one strategy to shore them up. In addition, with homes depreciating in many areas, they are being proactive in preventing homeowners from getting underwater on their home equity.  Our sources state that all the major lenders are either considering this or are already rolling out the freezes.  You should be especially concerned if your home lies within an area of declining home values and/or your Combined Loan-To-Value equals 90% or more based on current market value.

    If you know that you will need access to these funds within the next 1 or 2 yrs, then and only then is Bentley advising our clients to pull cash out now to ensure access to funds.  We're suggesting funds be placed in a high-yield savings acct offering an APY > 3.00%.  As of this writing, WAMU, Countrywide and E*Trade were all offering rates above 3.00%.  In my opinion, the wisest thing to do would be to payoff higher cost debt such as credit card balances.  Just be sure that you're able to access these funds via convenience check if need be w/out massive fees AND that you have the discipline to NOT max out your credit cards.  Doing so would negate the whole purpose of funds accessability.