DOUBLE WHAMMY: HELOCS & Jobs Data

I would like to hear from people whose banks and mortgage lenders have frozen or reduced their credit limit on their Home Equity Lines of Credit. Specifically, I would like to hear how how it's listed on and affected either someone you know or  Your Credit Report & Score. 

Every home equity line of credit, or HELOC, comes with a contract that says the bank can freeze the account if the home's value falls. Prominent lenders have been freezing HELOC accounts all year -- an action that flusters borrowers, but is sound banking practice.

I've heard that when banks freeze HELOCs, they report to the credit bureaus that the account is "closed, with a balance" -- and that this annotation causes the home owners credit scores to fall? I'm looking for confirmation on this, as I've not actually seen it happen, only heard thru grapevine postings. First, what does the credit report say? Does it say, "closed with balance" or something else? Second, is a frozen HELOC treated as derogatory information that reduces the credit score?  Please comment if you or someone you know has experienced this occurance. It's one thing if a lender arbitrarily shuts down or reduces the credit line, but it's also another, if the lender by doing so, has caused derogatory information to be placed on your credit bureaus.

I'm looking to hear from property owners who:  a) have received that unwelcome letter saying that their HELOC has been frozen because of declining property value, and b) have checked their credit reports afterward, and c) are willing to talk about it.

Describe your situation or experiences - Please comment on this topic here on my blog or throw me an e-mail at, tpurcell@lowratesonline.net 

And lastly, the recent JOBS numbers were: The number of nonfarm payroll fell in May, but not as much as expected. Meanwhile, the unemployment rate surged to 5.5 percent from 5 percent.  And the price for crude oil continues to hit records. Add it all up and mortgage rates have declined, but not much. Basically, you might get a little more value when/if paying discount points, but little other noticeable change in rates.

Thanks very much for reading my blog page - I hope you take away some bits of useful information that helps or triggers thoughts that help you in this real estate and mortgage environment!

Tom Purcell

Broker

Pinnacle Mortgage Group in Anaheim Hills, CA