The decline of home values raises concerns among homeowners and mortgage companies as well, about the real estate market. To minimize the risks of  properties being foreclosed upon, some lenders are cutting off home equity loans.  

In a stronger market, the rise in property values increased the equity in most homes and many homeowners refinanced their homes and created a line of credit. Home equity loans are often used for home improvements, pay college tuition and other financial needs.

Lenders are becoming more aggressive about reducing their losses and preventing foreclosures. Mortgage companies are taking steps to alleviate properties from  being foreclosured upon by repackage loans to lower interest rates before higher interest rates are triggered and, under certain circumstances, accepting a short sale.   Short sales reduce the foreclosure inventory, but not without a loss to the mortgage company.

The Mortgage companies’ latest defense against a loss in mortgage loans may be to shut down lines of credit on home equity loans.  Homeowners should be aware of the risks and implications.

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