Mortgages: Lender Cut-Off Goes To Court

A suit has been filed in Illinois against JPMortgage Chase alleging that the bank has cut off home equity lines of credit “in an attempt to limit their exposure to the risk of collapse in the United States housing market and rid themselves of less-profitable loans, Defendants have broken contractual promises to their HELOC account holders by reducing or freezing these customers’ credit limits without first reasonably assessing the value of each affected property or otherwise having a sound factual basis for reducing or suspending the accounts.”

Earlier this year the Federal Reserve explained that there were several conditions under which banks could reduce or freeze HELOC loan limits including a decline in the value of your home or a change in your financial circumstances.

The government says that “your lender must reinstate your credit privileges when the conditions permitting the freeze or reduction no longer exist. You may need to put in writing your request to have your line of credit reinstated. Once your lender receives your written request, they must promptly investigate and determine whether your HELOC can be reinstated.”

Of course, to get your HELOC loan limit back to where it was the lender has the right to charge you a fee. The Federal Reserve says “your lender may charge you fees to cover the costs for an appraisal and credit report when they consider your request for reinstating your HELOC. Your lender cannot, however, charge you a fee to reinstate your credit line once the condition that caused them to freeze or reduce your HELOC no longer exists.”

Why then would a lender restore any line of credit until a borrower makes a request for restoration? Once the request is made then the lender can change fees to consider the matter — and there is no requirement that the request will be granted.

The case was filed on behalf of Pascal Majon, 30, of Zion, Ill., who claims Chase denied him access to his HELOC account due to a purported substantial decline in the value of his home. In reality, alleges his law firm, KamberEdelson LLC, Majon’s home did not decline in value.

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Posted in: Mortgages

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