American Banker (08/27/08) P. 10; Hopkins, Cheyenne
On Aug. 26, the Office of Thrift Supervision released guidelines for thrifts to follow when freezing or shrinking home equity lines of credit. Under the Truth-in-Lending Act, fraud or material misrepresentation, the inability of borrowers to comply with repayment terms or actions that have a negative impact on the property are all valid reasons for lenders to suspend home equity loans. Additionally, the guidance says home equity loans can be frozen or terminated if the property value drops under the appraised value, material changes in income prevent borrowers from making payments or material default occurs. Foresight Analytics LLC reports a 345-percent surge in home equity nonaccruals at the nation's 50 biggest thrifts during the second quarter.
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