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Old 04-19-2008, 11:05 PM   #21
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Originally Posted by brewer12345 View Post
Hmmm, you mean you don't get banged with AMT? I do, and unless you meet very specific criteria, you cannot deduct home equity interest.

Since the Fed is not excatly champing at the bit to raise rates, I would probably go for a HELOC instead of a fixed second, myself.
Somehow we fell below AMT, but my tax preparer/step mom told me to be prepaired for bad news next year.
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Old 04-19-2008, 11:11 PM   #22
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My read on this is exactly the opposite. It seems that Etrade is trying to make sure they protect their interests, and they are doing it per the contract - so isn't that good business?

I can see how you would personally be a bit PO'd, but it is tough for a big business to review each and every one of these, they probably just set some rules and the computer decided who to freeze.

-ERD50
Heck, they could just leverage off of zillow! Seriously, it's pretty easy to leverage off of publicly available data, build in a pad and work from that.

I'm not disputing that they are in their right, I'm just saying it's poor business practice to screw your good customers. But as others have posted here, they aren't the only ones doing it. I guess the market will determin if their decision was wise.
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Old 04-20-2008, 04:05 AM   #23
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... we got a letter from Etrade saying they were freezing our HELOC due to the housing downturn. Not due to our credit (800+) or our payment history (always on time) but because they suspected our home didn't have any equity in it. Or rather, than any home in north San Diego county had any equity in it. So we aren't allowed to draw on the HELOC for money, period. WHAT THE HECK IS THE POINT OF A
They were too loose with credit in the last several years. IT would be too costly to reexamine everyone after the fact.

How would they know that you are an acceptable risk?

It appears that lenders are finally coming to their senses (a little).

My guess is that if you get a HELOC somewhere else, you will probably be scrutinized much more. For that matter... getting a HELOC at a securities brokerage firm... what do you think happens with that money most often? I am sure that they have some stats on it... I would wager to say it gets pushed into the market.

I would suspect that there are more than a few people using HELOC money to invest...

Would you loan money to someone who may not have the money to pay up...
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Old 04-20-2008, 10:11 AM   #24
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Let's put the shoe on the other foot. There are plenty of threads on this forum where people state they are going to refinance their mortgage, because they can get a lower rate than what they have now.

I don't see anyone screaming - 'Oh, you shouldn't do that to your bank. Hang in there with them, they gave you the mortgage, you owe it to them to keep paying that higher rate. Show some loyalty'.

When we take out a mortgage, it is in the contract that we can pre-pay it. So it's fair-and-square to do so. No apologies required for acting on a better deal.

That HELOC had this written in the contract, I don't think ETRADE needs to apologize or be demonized for acting on it.

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Old 04-20-2008, 03:35 PM   #25
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But it's idiotic to blanket the freeze on everyone and not do at least a bit of research.
By allowing you to appeal and present a fresh appraisal aren't they doing the research? Can you really blame them for not wanting to pick up the expense of a fresh appraisal for all their HELOC customers?

Historically, I don't think it has been uncommon for lenders to reconsider lines of credit when the assets used to back those lines of credit become suspect due to market volatility.

I understand you being generally pissed for the inconvience this is causing and the fact you now have to go change some financial plans. But when markets get volatile, that's what happens.

Frankly, it sounds like Etrade is doing the right thing from a profitability and risk control standpoint within their loan division. They just did a horrible job of selling it and the way they're undertaking this may negatively impact other divisions!
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Old 04-20-2008, 08:01 PM   #26
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i signed up for heloc many years ago. don't know why. haven't used it. just to have it i guess. anyway, i seem to remember my bank making a big deal that it didn't cost me anything to set up the heloc account. just some paperwork and it was done. but have others paid points or fees to set up their helocs? is that money returned as the banks now cancel or reduce heloc accounts?
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Old 04-20-2008, 10:25 PM   #27
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Wasn't it CFB who kept telling us that you didn't face any liquidity problems if you used funds to pay off the mortgage? Just have a HELOC ready and waiting in the wings.

Looks like there is a hole in that strategy.

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Old 04-20-2008, 10:57 PM   #28
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Hey, wait, is that fair? If people start holding me accountable for things I said before, this whole internets thing is going to be a lot less fun for me.
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Old 04-20-2008, 11:16 PM   #29
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Hey, wait, is that fair? If people start holding me accountable for things I said before, this whole internets thing is going to be a lot less fun for me.
LOL that would kill the fun!
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Old 04-20-2008, 11:50 PM   #30
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Laurencewill,

This may be a catalyst to move your accounts to somewhere else since you have not been fully satisfied with their service.

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Old 04-21-2008, 10:09 AM   #31
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I've heard of "financial advisors" (internet columnists and pundits) recommend HELOC's as an "emergency fund." You could qualify while employed and still solvent. When you were broke and out of work, you could live off of credit until.....

It never really seemed like a good idea to me to borrow money when you are already in a financial mess. It's the old saw -- "When you find yourself in a hole, stop digging."
The idea is, why have a large sum of extremely liquid cash sitting on the sidelines earning almost no interest, "just in case" a very expensive surprise crops of that demands a huge amount of cash?

We have our money fully invested, and we will rely on our line of credit for our "emergency fund." Not surprisingly, we haven't had any real "emergencies" that have necessitated using it. However, it remains available, and if we ever do need it, and we find we're unable to pay it back at a pace we're happy with, then we can start liquidating other investment assets to pay it off. It's not like we've spent those funds on HDTV's or caribbean cruises instead of building up an emergency fund. We simply invested it into accounts that are harder to access than a regular savings/checking account (in exchange for earning more interest).
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Old 04-21-2008, 05:05 PM   #32
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The idea is, why have a large sum of extremely liquid cash sitting on the sidelines earning almost no interest, "just in case" a very expensive surprise crops of that demands a huge amount of cash?

We have our money fully invested, and we will rely on our line of credit for our "emergency fund." Not surprisingly, we haven't had any real "emergencies" that have necessitated using it. However, it remains available, and if we ever do need it, and we find we're unable to pay it back at a pace we're happy with, then we can start liquidating other investment assets to pay it off. It's not like we've spent those funds on HDTV's or caribbean cruises instead of building up an emergency fund. We simply invested it into accounts that are harder to access than a regular savings/checking account (in exchange for earning more interest).
My emergency fund is in the form of laddered CDs which are part of my 60/40 equity/fixed income asset allocation. The worst case scenario would involve cashing in CDs early and paying the penalty.

If you have all of your assets "invested," I suspect you are almost 100% in equities which isn't what I would recommend but to each his own.

It just came to me. You're the guy who's hooked up with "Weath Builders" (on another thread). You need more help than I can give you. Your "investments" and asset allocation bear no resemblance to anything I'd want to own. Good luck to you.
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Old 04-21-2008, 07:41 PM   #33
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Wow, I see the board rides to the defense of Etrade! Again, I'm not saying they aren't within their legal right, nor am I saying that sobering up from their lending binge is stupid, it just seems they could have done a better job discriminating on who to shut down or shut out. If they considered my account to be a risk, they must consider all of their accounts a risk, and shut them all down, period. I can only conclude they want out of the business.

As far as, "well, you refinance whenever it works for you." that's true, but ultimately, I'm the customer, I'm paying them. Turning people away at the door just doesn't seem like a way to do business. But hey, I'm over it, I'll just move on to somebody else with my business.
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Old 04-21-2008, 07:54 PM   #34
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Turning people away at the door just doesn't seem like a way to do business.
I think things are getting a little dicey in the HELOC trade these days. Look at the latest default numbers.

UPDATE: Most Home-Equity Line Delinquencies Keep Rising

Quote:
Standard & Poor's said delinquencies on home-equity lines of credit issued in 2005 and 2006 shot up in March, underscoring continued trouble in the U.S. economy.
S&P said that 9.19% of lines issued in 2005 and 11.45% of loans issued in 2006 are delinquent, up 6.49% and 6.51% from February. Serious delinquencies, where lines are 90-days plus overdue or in foreclosure, shot up 8.83% and 8.75% for 2005 and 2006, respectively, representing 5.3% and 6.34% of the years' total issuance.
The lines S&P tracks were sold to investors as residential mortgage-back securities. Their declines have fueled the current credit crisis.
Delinquencies on lines issued in 2007, which have the worst record of cumulative losses in the credit crisis so far, fell 9.06% to 4.72% of the aggregate. S&P said 3.5% of year-old lines issued in 2007 have been booked as losses - more than three times the rate for year-old 2006 lines. Seriously delinquent 2007 lines were flat at 2.64%.
During the heady days of the housing market run-up, homeowners took cash out of their houses in the form of higher mortgages - under the assumption that values would continue to rise. Now that housing prices in the U.S. are falling, many people have seen that value of their home fall below what they owe, and some have been forced to simply walk away from their homes.
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Old 04-21-2008, 08:01 PM   #35
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it just seems they could have done a better job discriminating on who to shut down or shut out.
How many HELOCs does ETrade hold? I think you may be underestimating the effort it would take for them to make these determinations on a case by case basis. They probably need to worry about discrimination suits too. And they would need to do it quick. Once word got out, anyone with a HELOC would make a quick draw on it.

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I'll just move on to somebody else with my business.
That's exactly how free markets work. Let your wallet do the talking.

One thing that sometimes keeps me from bailing on a company/service when they do something I don't like: how do I know the 'other guy' is any better?

-ERD50
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Old 04-21-2008, 08:32 PM   #36
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They could also be cleaning up their mortgage business to sell.
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Old 04-22-2008, 01:48 AM   #37
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"turning people away at the door":
I have the impression pretty much every financial institution is hurting badly for cash. Less cash = fewer loans.. and fewer loans would seem to translate into less income. You're right, laurencewill --some of that is missed opportunities -- but I don't think they have a choice. Banks are paying OUT 8%, 10%, 12% themselves just to stay "solvent". It's just the reversing out of the past irrational lending and it's unclear how long it will take and how badly it will seize everything up [cue tinfoil accusations now].

It's not that I love or care about E*Trade.. but I can't see how anyone can get angry over losing credit based on a depreciating asset, either. The keg is empty and the party is winding down.
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Add this thread to the 'Pay off the Mortgage?' FAQ?
Old 04-22-2008, 07:13 AM   #38
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Add this thread to the 'Pay off the Mortgage?' FAQ?

Maybe this thread should be added to the 'Pay off the Mortgage?' FAQ?


There are a number of references there about using HELOCs for liquidity. Might be good to point out that these HELOCs can and have been frozen. Right at the time when the people could be most likely to need them.

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Old 04-22-2008, 08:15 AM   #39
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ERD50.. right.. AND "when people could be most likely to need them" is exactly when banks don't/shouldn't want to be on the lending side.
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Old 04-22-2008, 10:03 AM   #40
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ERD50.. right.. AND "when people could be most likely to need them" is exactly when banks don't/shouldn't want to be on the lending side.

What's the old saying? "A bank is someone who will only lend you money if you can prove you don't need it?"
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