Citibank Freezes Home Equity Lines of Credit
‘œRemember that credit is money.’ ‘“ Benjamin Franklin
As many readers know, I’m a proponent of keeping an untapped home equity line of credit (HELOC) at my disposal for major emergencies. This isn’t my emergency fund. It’s what I call my catastrophe fund.
I’ve always believed that keeping a HELOC readily available is the best insurance policy and the back-up plan for if / when the emergency fund runs empty. Think about it’¦ being able to tap this money could buy us time in the event of long term job loss or illness. And time is money.
When we bought our home three years ago, we put $300,000 down on the $1,100,000 purchase price. This was well over 25 percent of its value and considered reasonable in the era of zero-down loans. This amount gave us a nice chunk of equity in our house. I actually wanted to put more down, but our mortgage broker suggested otherwise. Her advice was that we could be doing smarter things with this money’¦ as in buying additional assets (cash positive rental properties, etc.) or other long term investments.
Immediately after we bought the house, our mortgage broker had us refinance and get a line of credit from Citibank for $168,000. We have never used it.
Of course the temptation is always there. We’ve wanted to remodel our kitchen since day one, but Jeanine and I agreed we’d wait and pay cash for this project (estimated at $45,000). Our cash went to other projects last year’¦ specifically the $55,000 spent trying to make a baby. This year, it will be another $25,000 – $30,000 to adopt a baby. We’ll be living with the old kitchen for awhile.
I list all the financial details to support my belief that we’re responsible borrowers. The HELOC is there strictly as a backup plan. For a catastrophe. Period. End of story. But with that said, I’ve always looked at that line of credit as my money. Money I could access at any time.
Last month, I wrote about how Countrywide suspended the HELOC on one of my rental properties and there were more than a few interesting comments I agreed with:
Countrywide got paid to open the account, paid religiously on my mortgage and the equity line and even got my money before I would have been contractually required to pay it. I, on the other hand, have sacrificed the opportunity to choose how to spend my money, given up a financial cushion, and will now need to completely rethink my financial planning. I feel like a chump!
Another person wrote:
But, the bigger problem as I see it is that Countrywide (and any other lender for that matter) believes they can freeze equity lines at will with no supporting documentation of a property’s decline in value.
I’m not arguing with the fact that the underlying collateral of a HELOC is the home and therefore the bank has the right (so clearly stated in the fine print) to suspend access to these funds. Live and learn. My rental property in Phoenix with the Countrywide loan did in fact decrease in value. This depreciation doesn’t matter considering I’m investing in real estate for the long haul. I’ve always purchased with the buy and hold strategy. Except for that little venture into fixing and flipping a few years back. That was the flip that flopped. Live and learn.
Aside from that, I’ve done most things right and for forty, I’m in a good place financially. I’ve always considered my primary residence to be one of my most solid investments. So it came as a surprise yesterday when we got the letter from Citibank about our $168,000 line of credit:
We have determined that home values in your area, including your home value, have significantly declined. As a result of this decline, your home’s value no longer supports the current credit limit for your home equity line of credit. Therefore, we are reducing the credit limit for your home equity line of credit, effective March 18, 2008, to $10,000. Our reduction of your credit limit is authorized by your line of credit agreement, federal law and regulatory guidelines.
Reduced to $10,000!? Hello!? Please don’t f-ck with my house in Newport Beach’¦
Of course, I’m calling them today to dispute it. Why? Because unlike the Phoenix property, I believe I can prove our home has retained its value and hasn’t declined. We have a Newport Beach address but live in what I’d describe as the low rent district of the city. It’s on the cusp of Eastside Costa Mesa and I believe the lender is using comps from Costa Mesa for comparison.
One reason why we bought in Newport is because we believed that property values would retain their value over time. After all, how many of you have heard of Costa Mesa? But most people have heard of Newport Beach. It’s considered desirable. People want the Newport Beach address. As real estate declines, it will decline more quickly in Costa Mesa. And it is.
But Newport hasn’t declined with any significance and if we compare current comps in our zip code, we can prove to the lender that our home has retained its value. Or so that’s my plan. I’m going to fight this one and I’ll write a follow up post about my success or failure with regards to the dispute.
In the meantime, this is what others are saying in some of the forums:
Over in the mortgage threads, there is much discussion of lenders restricting credit, even for prime borrowers. One of my FIRE plans has been to invest in tax advantaged accounts and pay off my mortgage and at the same time keep a HELOC for a possible source of emergency funds should it ever be needed. Is this still a viable plan, if the bank may unilaterally change the agreement? By keeping a relatively small emergency fund in cash, I feel like I am putting my money to work elsewhere, yet still have the HELOC to fall back on should a big emergency arise. What I am reading now seems to say this is riskier than I thought if the bank might refuse to extend funds as they previously agreed.
If this is real problem, then perhaps I should divert any money now paying off the mortgage into a larger cash emergency fund, in which case maybe the HELOC isn’t needed at all. I am reluctant to devote new cash to this, when it seems the HELOC really should be doing this job, but can I really count on the HELOC. I never heard of banks refusing to extend credit under an agreement they had already made, but people do seem to be reporting that happening.
I can see it would be safer to accumulate the savings. But what are the chances I really need that much safety? Is it becoming common for banks to withhold HELOC?
Here’s another perspective:
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.
So what do you think about all this mortgage talk? I’d love your thoughts below.
Additional reading:
Lenders Rethink Home-Equity Loans at The Wall Street Journal
Homeowners Losing Equity Lines at WashingtonPost.com
Nina, you’re underwater whether you want to accept it or not. California is experiencing record declines in home prices and no area is immune. Citi knows this and is taking steps to reduce their exposure.
Nina:
There’s a sense of entitlement on your part. Citibank is a bank in trouble, it will not be able to extend HELOC to all the previously qualified customers. Citibank is doing the right thing for its shareholders and bondholders.
If you think you deserve a HELOC line in excess of $100k in a rapidly declining market, go to other banks!
The lesson is, always keep enough cash for emergencies. Do not rely on “credit” as your rainy day fund. We as a nation needs to learn the word “saving” all over again!
“But with that said, I’ve always looked at that line of credit as my money.”
rubbish. it’s not your money and never was. Citi is cutting HELOCs and card limits like mad because they’re in bad shape and using any excuse they can muster.
prices/comps are falling all over the state. why do you think the crappy part of Newport Beach is exempt?
Nina,
Sorry to tell you, I agree with everyone above. I too live in OC, not as nice as Newport Beach, but practically ALL homes in CA has dropped in price and will continue to drop (check zillow.com and you can see Newport Beach home prices has dropped).
We are in the biggest housing bubble ever and no where close from bottoming. As you equity becomes smaller or negative, so does your credit line. If you bought your house during the peak 2005/2006, there’s a good chance you are upside down on your house or will be shortly.
Your sense of entitlement is shared by many and is what has brought on this situation. Either change your attitude or suffer the results.
Nina
your pattern of thinking is seriously flawed…you should walk away from your house as fast as possible.
I wouldn’t side with the banks on this. First they pushed the funky loans, then they sold the funky derivative investments, now they are calling in loans on investment banks and funds…they are bailed out by non-recourse liquidity by the Fed. These banks did the appraisals and it got way too loose with the HELOCS…now they are going to the other extreme and refusing credit to solid buyers and taking away too much credit because they are on a hunt for cash and are insolvent…don’t really have the fractional reserves they should. The banks created the Monster bubble.
Oh one last thing: outstanding HELOCs can be called. You’re very lucky you didn’t use any of it before Citi pulled the plug.
A line of credit is not an emergency fund. CASH (in the bank under the FDIC limit) or in hand, precious metals, and /or foreign currency. I keep all 3. Do not use credit except for my mortgage which is half paid off.
Nina,
You appear to be among the unfortunates who believe ol’ Ben’s axiom to hold true in all circumstances. The debt markets are in the process of delivering a sobering lesson in reality.
Those with MONEY will survive the onslaught. Those with DEBT will be steamrolled.
Do yourself a favor! Get that house on the market RIGHT NOW, and recover what you can of your down payment. ‘Buy and hold’ through the long, deep trough we’ve JUST begun to enter will be painful in the extreme.
A house is a home–NOT an investment. That ship sailed…
Read what I had to say about Nina on my blog http://globaleconomicanalysis.blogspot.com/
Hmmmmm….
let’s see.
Bought house in 2005 near peak of the largest bubble in the history of mankind…of course…you didn’t want to be “priced out forever”.
Complains about kitchen.
Purchases a child.
Thinks “her area” is immune. (was it immune to the runup?)
Feels like the lenders “owe” her that HELOC.
Sorry.
All I am reading is an entry that personifies narcissism and entitlement.
Nina,
It takes two to tango. Unfortunately your until-recently partner, Citi, had to make a mad dash for the restroom due to, uh, complications from that sketchy structured finance burrito they went through last night. Trust me, it ain’t pretty.
Ben.
PS watch for my two-bucks-for-your-euro (and associated 4-bucks-a-gallon) specials, coming this spring/summer.
nina….born and raised in huntington beach…on the good side no-less….the place has been over priced for 20 years..the people are just now becoming aware…you paid over a millon dollars for a home..that 20 years before was 80,000.00 arent you special
Why I believe in cash EFs, since people can’t take that away from you… But that’s the reality of home-buying…the money is only really yours if you need to pick up and move with it (unless you’re renting, in which case the money’s not yours until you sell it). And even then you’ll need it to pay for the new place.
It may still be a good investment on am emotional level and as having a way to store money so you’ll be able to buy another house easily if you move. But in the end the money goes to the bank to pay off the house, they don’t have to lend it back. :-/
I don’t get the comments telling nina to walk away from her home? If she is not in a crisis and capable of making her payments why should she destroy her reputation? Are we living in an age where a person’s promise no longer matters? It really stinks of nillism and a lack of character.
@Chris: I don’t see anyone telling Nina to walk away. Apparently she’s not in any financial distress (though I have to wonder what kind of $1.1 million house needs a $45,000 kitchen overhaul); I think the general consensus can be summed up as “stop complaining and start saving.”
Sigh. If we could get past the petty remarks… While it’s true that a loan is not the borrower’s money — it does, after all, belong to the lender — and yes, it would be good to have cash savings in hand to use as an emergency fund, figuring that you might someday want to borrow against the equity that YOU put in to a piece of property is not “entitlement.” It’s just a plan to borrow against an illiquid asset.
Are you sure the value of your Phoenix property actually has dropped? Depends on the part of town.
Just had a centrally located shack reappraised in hopes of refinancing for a lower rate: $20,000 more than its appraised value 16 months ago, $35,000 more than we paid for it.
If your property is in the fringe suburbs — Anthem, Queen Creek, out by the White Tanks — it probably has lost value. But some zip codes not only have not dropped in value, they’re actually rising. So, don’t assume anything based on a generalization.
Meanwhile, back at the seashore: if you put 300 grand down on a $1.1 million hovel and you can you can manage to stay there for a few years, you are not gunna lose your shirt. Given that the place doesn’t flood, burn, or slide into the ocean, whatever loss you experience in the short run will be recovered in due time. And in spades.
essentially all bank are in survival mode…not just citi
Hi Nina,
This is your house speaking. Soon, perhaps in 18-36 months I will only be worth a paltry $600,000 and your equity will be wiped out.
Citi revoked your HELOC on me because they are broke and that money was never yours to begin with.
Chris,
Housing is the new dot com bubble…. take a look at the NASDAQ. How many of the once great companies are now worth zip???? The comment for Nina to walk away is that the first $300,000 that is lost is her money, not the banks… Cut losses and preserve capital. It could be many many years before prices rise to a level that will allow lost equity to be recovered (if at all). How much will the $ be worth then? $0.60?? $0.40??
Nina. Learn about what money is. Credit is Debt. Debt is not wealth. In the coming years, those with no debt will survive, those with debt will drown.
“I’ve always looked at that line of credit as my money.”
Ahahahahahahaha!! You’re kidding, right? The bank’s money, which it may or may not loan to you entirely at it’s discretion, is your money? AHAHAHAHAHAHA!!!
Oh. You’re not kidding. Oh, well then. You’re boned, kid, get used to downsizing fast.
Everybody who doesn’t buy now will be priced out forever. Anybody who does buy will be rewarded with a lifetime of riches, as their property will continue its 25% yearly price increase.
Renters, and anybody born in a future generation, will not be able to afford a $5,000,000 starter home in 15 years. They will live in tent cities and hondas.
This asset bubble is different from all of the others – it will never slow down or pop. The gains are permanent.
Credit is credit. Credit is not money. The E stands for Equity and the C stands for Credit. Regardless of what you THINK has happened in Newport Beach the bank is taking prudent protection and taking away your HELOC (or most of it).
I can’t believe the attitude of people towards credit and that they somehow “deserve” it. You, Nina, are ridiculous.
Sounds to me like someone needs a lesson in fractional reserve confidence game bank run end games. Face it, our system is rotten to the core and many people are just now learning it. How many people know that their banks only hold a tiny fraction of deposits at any given time? This is all banks. It is all a con. FDIC saving your butt? Nope. The house of cards is doomed to failure, the only question is when. Thank the Federal Reserve Act of 1913 for the immense size of our current house of cards. Bernanke better not get on the helicopter or else the wind from its rotors will blow the house down. A dollar crash would not be fun.
I agree with Chris!
Nina, that HELOC was *your money* dammit! You’re ENTITLED to it. Whatever happens, don’t listen to all these jealous losers (probably all renters & goldbugs). You keep feeding that hungry ‘gator and spending Other People’s Money (OPM) no matter what they say –it’s the Amerikan Way!
Saving is for Sucker$!
Debt = Wealth!
If we stop spending OPM, the terrorists win!
Wow, Nina – you certainly demonstate P.T. Barnum’s axiom that a “a sucker is born every minute,” – the HELOC being YOUR money as an assertion made me laugh so hard – surely a descent into the theatre of the absurd!!!
I also think you should carefully read W.C. Fields – or at least watch a movie or two. “Never give a sucker an even break!”
Your money. Hee hee.
Likely the $300K you put down in NEWPORT of all places has slid down the turd tunnel along with nearly everyone else’s equity…save that in San Antonio, of course 😉
Good luck, honey, you will need all you can get.
Mish et al.: As noted in my post, it’s not my “emergency fund” – I considered the equity line to be my “catastrophe fund” – the back up to my back up plan.
Do you really think I would buy a million dollar home if I didn’t have cash on hand to ride out an emergency. Obviously, I have savings… enough cash in a liquid savings account to pay our mortgage and all expenses for over a year. Beyond savings, I have mutual funds and other investments. Beyond that, I have a healthy IRA and max out my 401(k) every year.
I save 15-20% of my annual income. We both have credit scores in the 800s. I think I’m a pretty good credit risk for any bank.
What I should have said is that if there was a “long-term” job loss or illness. It could take a lot longer than a year to replace a job loss in this economy – which is why I’ve always look at the equity line as added security and something we could tap.
With that said, you make a valid point about it not being my money now. But when you write a check for $300,000 and three years ago the bank indicated I could leverage and borrow against – well, I don’t think that personifies a sense of entitlement.
Mrs. Micah: You’re absolutely right, they don’t have to lend it back… lesson learned.
Funny about Money: Thanks for your insight. I’m happy to share more about Phoenix offline.
“As noted in my post, it’s not my “emergency fund†– I considered the equity line to be my “catastrophe fund†– the back up to my back up plan.”
Meaning: When catastrophe strikes and you use the HELOC cuz all other money has run dry, you expect the bank to give you money?
Defining “entitlement” might be a good exercise for you.
Nina: Your mistake was buying at, or near, the top of the bubble. Sorry.
Alas, even the less affluent parts of Newport Beach are not immune to the bursting of the housing bubble. Southern California, in general, had one of the biggest bubbles nationwide, and the entire region is in the long, slow process of deflating. Both lenders and borrowers have contributed to this sad state of affairs, but until it’s over I don’t think anyone should expect lenders be willing as they once were to extend credit. Nina, Citi will politely listen to your protest, but it will also be politely ignored.
Nina, I don’t know if you read the New York Times, but today’s edition has a story on why banks are yanking HELOCs like yours.
I must say, you’ve been good-humored about allowing the snark and critical comments to stay on your blog. You must be a liberal. I’ve noticed that most conservatives (and more than a few left-wingers) will delete everything hostile to them. Good onya for being tolerant!
Nina,
You bought a house three years ago – at the peak of the real estate bubble;
You think a line of credit is the same as an emergency fund;
You tried “flipping” and failed;
You took investment advice from your mortage broker;
After all that has happened in California real estate, you still think you are not underwater on your Newport beach house.
Nina, you have no business giving investment advice to anyone.
Nice ! you agreed to pay roughly 2000 ozs of gold for your sweet home. Today Citi says that it’s worth less then 800 ozs – gold. My guess is that it will be around 300 ozs – gold in couple of years.
But then again, everybody wants that “Newport Beach address” !
housing vs dollar vs gold (oil etc)
Where I’m confused is why people feel it is such “entitlement”? I don’t read it that way.
While I know debt is debt and not “my money”, isn’t the reason people get a HELOC in the first place is to cover big repairs or other unexpected household related items that they cannot pay off in one fell swoop? If we had gobs of cash (in addition to a 6-12 months liquid emergency fund) we wouldn’t need another line of credit, right?
Is there another reason people (particularly those that are in such a huff) get one I don’t know about?
As someone who has one & has used it for household improvements and paying on it slowly…. I would be more than a little pissed if I had to pay it all back at once simply because the banks can’t get their act together. I “get” that house prices are dropping…. but still – when I look at my own situation I bought my house at “X”, prices went to 3 times “X” and are now at around 2 times “X”. I’ve got equity in it WAY over what I bought it at and then some….but that doesn’t mean I shouldn’t have or be able to use a HELOC.
This has been a hoot – listening to everyone complaining about Nina giving advice. When did any writer at queercents who is not a financial professional (that includes me) ever give financial advice? Just personal experience and opinions.
Carry on… and thanks for the thought provoking article Nina & the interesting conversation everyone.
I figured Nina would delete my last post pretty quick -which she did.
As far as Paula saying Nina does not give financial advice… gee, how about this qoute (one of many from articles written by Nina which I could have selected to demonstrate the same point):
“Anyway, having a HELOC is good advice in my opinion”
So what about the phrase “is good advice” makes this not, well…”advice”?
And to add to the irony – do you see now, from Nina’s experience described in her recent post, why relying on a HELOC as an emergency or catastophe (or whatever semantics she wants to apply to it) fund was not good advice in the first place?
Nina,
I wonder why someone with a million dollar home, a maxed out 401k, rental properties, a years worth of cash, and saves 15-20% of their income is even getting worked up over a HELOC of $168,000 being put down to $10,000. I imagine it is the principle of the thing, but seriously is $168,000 even a catasttophe fund for someone of your income level?
#18 Funny about Money: Your property appreciated in Phoenix!!! You have got to be joking.
I know investoes there who are being hammered, and values are falling like a stone. I think you are deluding yourself.
You bought at the top of the market and your house is overvalued, the line of credit — which is NOT money and is NOT yours — has been reduced to reflect that.
Unlike most people, you are thrifty and have plenty of savings, so why worry about it? Your catastrophe fund are your rental properties — if you need to, you will sell them.
Nina,
I’m sorry you were sucked into an overpriced cracker-box house at the very top of the bubble. Unfortunately the bank has every right to take back the HELOC due to the dropping home value. We bought our cracker-box home in Huntington Beach in 2000 and sold it with an incredible profit in 2006. We saw the bubble ready to burst in 2005 and we got out as soon as possible. I was born in Long Beach and raised in SoCal. We moved out of state and I will never go back. You should be glad that you never tapped into the Heloc and that they took away the choice to use the money. Cash is king. Only spend what you can save. Save your own emergency fund. Stop living with so much debt and you will have nothing to worry about. Everything that we have, we own. We have no debt and there is no better feeling in the world. You should try it sometime.
” Do you really think I would buy a million dollar home if I didn’t have cash on hand to ride out an emergency. ”
Yes, I do.
Just stop showing off with Newport Beach. You live in the least desirable parts of it. Your home is worth as much as your Costa Mesa neighbors’.
Paula: Thanks! Nice to hear a friendly voice.
JJL: It is a matter of principle… and the added safety knowing this money is there and accessible.
I hear what everyone is saying… this isn’t “my” money. Point taken. I accept that. But then shame of me for putting so much down. We could have qualified with 10% and a payment that wasn’t much more than we’re paying today. But I thought I was doing the responsible thing. Would I have been better off keeping $150,000 liquid in savings?
According to most of you, yes, because my house will be worth $600,000 in a matter of years and I’ll eventually foreclose on it… and oh yeah, I should have just rented the last ten years in California… brilliant suggestions!
SoWhat: The only debt I have is my mortgage and the mortgages on my rental properties (which my tenants pay for me and I pocket the extra cash). I have no other debt. I own my car. I don’t have any credit card debt or student loans and haven’t for over a decade. The only reason you bought your house for cash in Utah (now there’s a place I’d be rushing to move to) is because you profited from the same bubble you’re chastising me for buying in.
Three years ago all the bubble heads were waiting for me to crash and burn with our Palm Springs project. Three years from now, they’ll be saying I’m doing something wrong like they’re saying today. The comments really don’t bother me (except mean, anti-gay ones I deleted from Jasper – really, did you think I’d let that through the moderation queue?? Add to the conversation and you’ll be heard.). Actually, I’m entertained by all the commotion…
Yes. It was a mistake for you to put so much money down on your home purchase. That was mistake number 1 that you made. You volunteered a lot more skin than the bank required of you. You have put so much down that you have essentially erased your legal option of walking away and leaving the house in exchange for your debt (and you may have also muddied the water on whether your loan was non-recourse under CA law when you refinanced shortly after purchase–I’m not giving legal advice but it is an issue). So you essentially made a huge bet on one particular asset and you didn’t leave yourself any wiggle room to get out of it. It’s funny, someone poked fun of you for relying on a mortgage broker for advice and I totally agree with that sentiment but in this case the mortgage broker turned out to be right! You put a lot of eggs in one basket when you didn’t have to. You should have used CA law on non-recourse loans to your advantage to hedge your risk of losing your bet.
Mistake #2 was buying at the peak of the market. Yes, the reality hasn’t hit you yet and hasn’t affected your bottom line yet (apart from some of your lines of credit being rescinded and you probably starting to worry about the long-term numbers you used when you made your gambles). You apparently do not comprehend the freight train coming your way. We’ll see if you are prancing around condescending to all the “bubbleheads” in a few years as your apparent riches diminish in value and your debts mount . . . . which leads me to . . .
Mistake #3, your debt. You actually seem fairly responsible, nice, and overall successful person. Unfortunately, your mistakes are so huge that they risk seriously impacting you for decades. Yes, you don’t have credit card debt and other debt. But you have a huge amount of debt. It always cracks me up when people say they are debt-free when they have borrowed over a Million dollars to finance real estate purchases. You have to pay that money back. Yes, you may be making more money on your rentals right now but you also stated that you are having problems at a number of your properties right now and that your cash flow is being interrupted. I seriously doubt that your numbers are going to look that great in a couple of years.
Seems I’m late on this one.
Yes Nina bought at the top of the bubble… AND IT DON’T MEAN A @#$^%$ THING as long as she intends to stay in the home for a long time and has the financial resources and income stream to make the payments and still have a prudent savings/investment plan which she and her partner appear to have.
IMO Nina’s home may have slid in value and eaten up her equity so that Citi had the right/duty to chop off the Heloc… SO WHAT???
In 10 years or so I think the market will have recovered enough to bring the value back to the original purchase price.
So No Capital Gains Killing… but Nina will have whatever equity she has built up in the house from paying down the Loan and its STILL HERS and she and her Partner can fix it up any way they want to so that it SATISFIES THEM… and You HAVE to have a place to live.
What I want to know is how many of the other commenters have gone out and overpaid for something (according to all their friends and family or sudden downward price changes in the market) because the item in question was EXACTLY what they had been looking for in that item??
I’m GUILTY of it and I really don’t care what others think about some of the things I’ve “overpaid” for over the years… in the long run they have turned out to be WAY cheaper than buying the third or fourth best and paying less money.
Many of them have also given me (and still do) something else that is Non-Monetary but just as important… a Level of Emotional Satisfaction and Happines every time I use the item.
My Pots and Pans are an example… I hunted for 2 years until I found EXACTLY what I wanted that fit all my criteria for Function and Quality and that also appealed to me on an Emotional Level… I’ve had them 30 years…never had to replace anything or have anything break… they function as the best should distributing the heat and cooking perfectly… and I Truly Enjoy using them because they LOOK and FEEL to me the way I (Repeat “I”) believe Cookware should.
My Mother was aghast when she found out I spent over $4000 on about 20 pieces of Mauviel Copper back then… it would probably cost me FOUR times that today but if I was 20 again I’d STILL do it… though it might take me longer to get all the pieces I wanted.
And both my Brothers have spent way more than 4 G’s on cookware in the intervening years but I’m the only one with the Originals I first bought… ones on his fourth set of… whatever.
So Ignore them all Nina… as long as YOU and your Partner are Happy… $#&^%^#’em.
~ Roland
SFHawkguy: I agree with you to a certain extent on Mistake #1 and #2, but here’s the tough part: Let’s just say three years ago, I had only put down 5% (I could have qualified with this amount). Had I done this, then all the “bubbleheads” would have put me in the “zero-down” bucket of borrowers and pounced on me then. I thought I was being responsible. Lesson learned. Or maybe not… after all, don’t I still have to pay off my mortgage? Read on…
Re: Buying at the peak of the market. Where am I moving to? We like living in Newport Beach. Why can’t I stay and pay off my mortgage? We spent $55,000 last year trying to get pregnant. We paid this in cash. Assume then, that in a given year, we can afford to pay down our mortgage at this clip. It will eventually get paid off. I’m forty years old and in my prime earning years. I think I have a few years left in me to make money. But I’m sure people will say that’s debatable… jeez…
Re: My debt. How does my debt increase over the next several years? If I pay down my mortgage, then my debt decreases. I don’t get your train of thought here. About the rental properties. You’re incorrect about me currently having problems. I had problems last year when I wrote that post on Nov 26, 2007. But I reported they were all rented again in a post dated Feb 4, 2008. It’s the end of March. Still rented!
Roland: Thanks for the comment. Of course, I’m sure that most of these commenters will argue that the market will not come back in ten years. Who knows? How can I make that prediction? But this is my house and home and I have a really nice place to live. Thank you for your support!
Nina, I talked about on the radio:
http://www.howestreet.com/audiovideo/index.php?pl=/goldradio/index.php/mediaplayer/821
Nina: see, the part that has everyone laughing is the part where you assume that a HELOC is your right, and are peeved to find out it’s not.
There’s no law that says anyone has to give you anything, certainly there’s nothing that says your bank is obligated to loan you money based on your equity.
See? The assumption that you are entitled to the HELOC, that’s what everyone is amazed by. The arrogance of that assumption.
🙂
Nina,
I appreciate that you are able to put the details of your situation so clearly for others to look at. Clearly you are financially stable. It isn’t that you are a “credit risk†but your home is. Most banks including Citi are facing liquidity issues and a problem that is occurring is folks are drawing on their HELOC as you have mentioned, as their last line of defense for whatever emergency is occurring. Clearly the majority of people using this strategy either because of job loss, medical reasons, or other life circumstances have a higher likelihood of not making good on their payment. This is doubled given that we are in a recession and California home prices are declining much quicker than other states in the Country.
The reason for the draw down also occurs from a risk management perspective. HELOC are given junior priority should a home be foreclosed or sold via a short sale. I’m not saying this is your case but this is from the perspective of the lender. The lender hypothetically is probably looking at declining values statewide for California and $168,000 is a significant loan. I did dig up some stats on Newport Beach:
Newport Beach 92660 $1,390,000 -13.1% year over year change with 11 sales
Newport Beach 92663 $1,420,000 +70.3% year over year change with 11 sales
It is hard to gather long term projections in your market because they can gravitate to extremes. Even with your large down payment of $300,000 the lenders still had to come up to the table with $800,000. A decrease of 15 percent is enough to eat up the $168,000 HELOC. Clearly with the $300,000 you have enough of cushion to support a 27 percent drop and still break even.
Best,
Dr. Housing Bubble
“But with that said, I’ve always looked at that line of credit as my money.†is a risky way to approach the HELOC. I can sort of understand Citi (and Countrywide’s) position because they want to reduce their exposure, it’s just something we haven’t seen in quite some time.