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Old 02-16-2008, 12:24 PM   #41
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Solid contract is fine, just make sure you read the fine print. Last I looked, it usually gives the bank lots of leeway to do whatever they feel like.
Yeah, I looked when this thread took this turn; I am in a very weak position.
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I don't do much with my local bank either, and I am probably a marginally profitable customer at best. So I have my HELOC with Schwab, where I know I am a valued customer that is worth a lot to them. So I presume they will be more hesitant to jerk me around on the HELOC.
Hmmmm. Now there's a thought.
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Old 02-16-2008, 12:31 PM   #42
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Solid contract is fine, just make sure you read the fine print. Last I looked, it usually gives the bank lots of leeway to do whatever they feel like.

I don't do much with my local bank either, and I am probably a marginally profitable customer at best.
Last time I looked at my HELOC, they had the right to freeze it whenever in their sole opinion they were concerned about the collateral or my ability to pay. A few years back, I was in the branch the everning that a large local company had announced massive layoffs. The branch manager told me that they had automatically frozen every HELOC for customers who worked at that company until they knew who was going to be laid off and who wasn't.

Dunno it this will ever help me or not, but I pop into my [small] local branch periodically to deposit a check or take out some cash. I always walk right up to the branch manager, so that he knows me and knows that I'm making a deposit. It certainly helped when I wanted them to reverse a "below minimum balance" monthly charge in my MM account. Three times now he's reversed it. He knows me by name now.
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Old 02-16-2008, 12:51 PM   #43
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Last time I looked at my HELOC, they had the right to freeze it whenever in their sole opinion they were concerned about the collateral or my ability to pay. A few years back, I was in the branch the everning that a large local company had announced massive layoffs. The branch manager told me that they had automatically frozen every HELOC for customers who worked at that company until they knew who was going to be laid off and who wasn't.
Spooky. I would usually think that most banks are dumber than to use the language that favors them to actualy protect themselves. Must have been a reasonably smart branch manager in charge, or a local bank (rather than a clumsy behemoth).

I view a HELOC as just one of several liquidity alternatives that I generally have lined up at any given time. Usually have a chunk of cash, some CDs I could break, untapped credit cards, margin loan availability, and the HELOC. If the commode hits the windmill, at least some of these options could be tapped.
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Old 02-16-2008, 02:41 PM   #44
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One bank was TCF bank. Bankrate.com Star Rating: ****. Market Cap: 2.45B 453 retail banking branches.

The other was Motorola Credit Union.

Another clause that favored them was the right to offset the HELOC balance against any deposits you have in any other account at the bank.

I believe these are both pretty standard clauses. But then---how many people ever actually read the loan documents they are signing? Darned few.
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Old 02-16-2008, 03:14 PM   #45
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TCF is really an overgrown community institution which does a lot of HELOCs. I am not surprised they were sharp enough to catch what was going on and protect themselves.

The right of offset is really, realy common language in loan docs. Even the car loan I took from Pen Fed a few years ago gives them the right to offset deposits vs the loan if I default.

Dunno what to say on whether people read the docs. Can't help the terminally stupid or lazy keep from shooting themselves in the foot, I guess.
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Old 02-16-2008, 03:25 PM   #46
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One bank was TCF bank. Bankrate.com Star Rating: ****. Market Cap: 2.45B 453 retail banking branches.

The other was Motorola Credit Union.

Another clause that favored them was the right to offset the HELOC balance against any deposits you have in any other account at the bank.

I believe these are both pretty standard clauses. But then---how many people ever actually read the loan documents they are signing? Darned few.
You hit the nail on the head!

The fact that people failed to read and understand their signed loan documents is one of the reasons we're in this mess.Instead of taking personal responsibility,they blame the banks,brokers and whoever else they can think of,when they should be looking in the mirror.
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Old 02-17-2008, 10:02 AM   #47
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Operating without an emergency fund is like playing Russian Roulette.
Don't assume the HELOC will always be there to draw from.In this enviornment,it's here today and it may be gone tomorrow.
Here's a story about a man who paid off his HELOC with all of his savings,only to have it frozen days later by Bank Of America.
Everyone who's worrying about this can send me their mailing address, and I'll be happy to forward the half-dozen attractive home-equity financing offers we're receiving in the mail every month. Our latest one came from somewhere in Florida. They weren't sure how to spell Hawaya but they were pretty confident that they could loan us a lot of money on it.

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Last time I looked at my HELOC, they had the right to freeze it whenever in their sole opinion they were concerned about the collateral or my ability to pay. A few years back, I was in the branch the everning that a large local company had announced massive layoffs. The branch manager told me that they had automatically frozen every HELOC for customers who worked at that company until they knew who was going to be laid off and who wasn't.
With easy credit-union membership requirements and all the discount brokerages in the world offering HELOCs, I don't think I'll ever set foot in a bank again. Don't like the HELOC you have? Go find another one. I don't think it'd take long.
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Old 02-17-2008, 11:24 AM   #48
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Seems to me the most likely emergency requiring use of the HELOC also involves loss of my job. My understanding was that the agreements generally give the bank wide ranging powers to limit my usage of the credit line and we're seeing some of this in the market with banks freezing HELOCs in down real estate markets. My own line is well coverered by the equity in my house, even if prices fall a lot, so I think that is not going to be a problem, unless they start unilaterally freezing and exiting the HELOC business. Probably that's unlikely. Even so, I wouldn't plan to draw their attention to my loss of a job, if that's why I need to access the line.

But the job connection is still a concern. I have the equity to open a new line if the bank does the unexpected with the old one. But presumably that would only be needed at the same time I'm looking for emergency cash due to job loss. Will banks open new HELOC for someone with no employment, but with plenty of equity? If that's possible, then I think leaving the HELOC as emergency fund is still a viable solution. If loss of job means exposure to cutting off current line and impossible to get a new one, then I don't think this plan will work for me. Anyone know if sufficient equity can get one a HELOC even if temporarily unemployed?
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Old 02-17-2008, 11:31 AM   #49
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. Anyone know if sufficient equity can get one a HELOC even if temporarily unemployed?

Probably not. At least I would not count on it. As many have suggested, you want these measures in place before they are needed. The real point to me is the sentiment expressed by Brewer is to have multiple sources of emergency funds available depending on the nature of the emergency.
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Old 02-17-2008, 12:10 PM   #50
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I've gotten them when I was permanently and fully unemployed.

House is paid off, plenty of assets, plenty of cash flow, tax forms from the last few years show good income numbers.

No reason to deny me a secure loan on an unmortgaged asset.
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Old 02-17-2008, 12:45 PM   #51
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Seems to me the most likely emergency requiring use of the HELOC also involves loss of my job. My understanding was that the agreements generally give the bank wide ranging powers to limit my usage of the credit line and we're seeing some of this in the market with banks freezing HELOCs in down real estate markets. My own line is well coverered by the equity in my house, even if prices fall a lot, so I think that is not going to be a problem, unless they start unilaterally freezing and exiting the HELOC business. Probably that's unlikely. Even so, I wouldn't plan to draw their attention to my loss of a job, if that's why I need to access the line.

But the job connection is still a concern. I have the equity to open a new line if the bank does the unexpected with the old one. But presumably that would only be needed at the same time I'm looking for emergency cash due to job loss. Will banks open new HELOC for someone with no employment, but with plenty of equity? If that's possible, then I think leaving the HELOC as emergency fund is still a viable solution. If loss of job means exposure to cutting off current line and impossible to get a new one, then I don't think this plan will work for me. Anyone know if sufficient equity can get one a HELOC even if temporarily unemployed?
Lien holders in 2nd position are in a VERY risky environment right now,which is why they are tightening their standards and freezing lines of credit.If the lien holder in 1st position forecloses,the 2nd is wiped out and up the creek,unless there are additional proceeds from the sale.Their only recourse is to go after the previous owner and that's like trying to squeeze blood out of a turnip.

I don't have a crystal ball,but I do believe it's going to worse before it gets better.I'm a very optimistic person by nature,but I also look at the real picture and I don't like what I see.Defaults are expected to rise in 2008-2009 and I've noticed a 30% ytd increase over 2007 in my area alone.

Not too long ago,NO DOC HELOC's were available from some lenders,for unemployed individuals and anyone else for that matter.They are a thing of the past for the most part.
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Old 02-17-2008, 04:52 PM   #52
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Will banks open new HELOC for someone with no employment, but with plenty of equity?
Anyone know if sufficient equity can get one a HELOC even if temporarily unemployed?
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I've gotten them when I was permanently and fully unemployed.
No reason to deny me a secure loan on an unmortgaged asset.
Heck, our house has two chronically unemployed adults and a mortgage yet we're still beating the HELOC offers off with a stick.
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Old 02-17-2008, 07:45 PM   #53
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Lien holders in 2nd position are in a VERY risky environment right now,which is why they are tightening their standards and freezing lines of credit.
Only if the loan to value percentage is high, i.e, you have relatively little equity. If you have a high percentage of equity, the 2nd position lien holder is in a safe position, and you will have no problem getting a HELOC.
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Old 02-17-2008, 07:55 PM   #54
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no, not heloc. the charity fund is the emergency fund. hasn't anyone been paying attention?
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Old 02-17-2008, 08:48 PM   #55
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Seems to me the most likely emergency requiring use of the HELOC also involves loss of my job. My understanding was that the agreements generally give the bank wide ranging powers to limit my usage of the credit line and we're seeing some of this in the market with banks freezing HELOCs in down real estate markets. My own line is well coverered by the equity in my house, even if prices fall a lot, so I think that is not going to be a problem, unless they start unilaterally freezing and exiting the HELOC business. Probably that's unlikely. Even so, I wouldn't plan to draw their attention to my loss of a job, if that's why I need to access the line.
I had the same thoughts and concerns about using a HELOC as an emergency fund in the event of a job loss. But I've decided it's a good option, as one source of funds among others, because in the event of a job loss, it would be unlikely that the bank would know about it, but in any event, I would transfer funds from the credit line immediately upon losing my job.
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Old 02-19-2008, 01:07 AM   #56
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One of the benefits of using the HELOC as an emergency fund was that there was no easily identifiable big cash balance sitting around. This meant available funds were invested productively. This meant that temptation to buy big ticket itmes was reduced since it would require selling something or drawing on the HELOC. A useful extra measure of will power to keep LBYM.

So if I change my thinking about HELOC so it's only one source of energency funds among several, then I'll also need to add a money market or some other cash savings. If I cannot count on the HELOC for cash under some common emergency situations, such as job loss, then I guess I better start building a more conventional cash emergency fund. Ooohhh, those fast new computers sure look attractive.
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Old 02-19-2008, 03:13 AM   #57
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last thing id want to do is owe money secured with my home in a cash crunch. if i was forced to sell equities in a down market to cover some of the loan then the hole thing would be self defeating
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Old 02-19-2008, 06:01 AM   #58
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Isn't really about timing? If you use the HELOC and have to actually withdraw money from it can't you time the repayments? I do not know about most HELOC's but the one I have does not contain any prepayment penalties so assuming I needed the cash for a real emergency I could time the selling of the repayment asset. That would require some thinking and management but I think it mitigates or, over time, negates any "creating any financial problem for the home".
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Old 02-19-2008, 09:43 AM   #59
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Another voice in the argument for setting up a HELOC before it is needed:

Fed official: 2008 economy like 1991 recession - Feb. 19, 2008

2008 similar to 1991 recession

"Gary Stern, the regional Fed president, said the current excesses in residential construction, housing market decline, and credit crunch all resemble the "headwinds" environment that prevailed 17 years ago."

"If credit is in fact restricted by some institutions and in some markets, it will likely take time for potential borrowers to find alternatives and substitutes."
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Old 02-19-2008, 11:10 AM   #60
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Another voice in the argument for setting up a HELOC before it is needed:

Fed official: 2008 economy like 1991 recession - Feb. 19, 2008

2008 similar to 1991 recession

"Gary Stern, the regional Fed president, said the current excesses in residential construction, housing market decline, and credit crunch all resemble the "headwinds" environment that prevailed 17 years ago."

"If credit is in fact restricted by some institutions and in some markets, it will likely take time for potential borrowers to find alternatives and substitutes."
I do not see what that article has to do with most on this board. Some markets, some locations, will be restricted. Restricted to who? Probably not many here. Additionally, if you have a HELOC in place with an institution that has a World-wide and pretty selected clientèle - people that have a solid employment and are pretty well know for paying their bills, what is the worry?
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