Home Equity Line of Credits Being Drained

Shhh, do you hear that? That gurgling noise you hear is the sound of equity coming out of your home. Since January of 2008, home equity lines of credit are being dropped as fast as they were being pumped up just a short time ago. Only six months ago, you could find home equity line of credit loans for 100% of your home's market value - some even at 125%. Today, most banks have dropped the offer to 70-80% of the value of the home. The reason is falling home prices.

I decided to check one of the best managed banks out there, my bank - USAA Federal Savings to see what was going on with them. USAA Federal Savings is a military bank and manages their company with low risk investments. They are calling customers in areas that have seen significant drops in home prices. They are informing their customers that their outstanding line of credits are now cut back from 100% of the value of their home to 70%, less the customer's outstanding balance. This is effective immediately. According to them, they are one of the last banks to be doing this. So, if you haven't been called by now, perhaps your balance is still within the guidelines of your bank.

Home equity lines of credits are used by many homeowners for many reasons - home improvements, purchasing cars, college tuitions, etc. Recently, it's been reported that baby boomers are tapping into their line of credit just for day to day survival. However, the tapping is running dry as the real estate crisis is seeing no end in sight.