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#1131687 - 02/18/09 05:28 PM HELOC's, Appraisals and FIRREA
YHWB Offline
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Joined: Apr 2005
Posts: 638
Out there
We have seen numerous large banks sending out blanket, generic letters to their HELOC customer stating that the value in homes in their neighborhood have declined and therefore the bank is reducing the HELOC amounts, without the customers consent. Under 226.5b(f)(3)(vi)(A) a bank can change a HELOC if “the value of the dwelling that secures the plan declines significantly below the dwelling's appraised value for purposes of the plan”. My questions are:

1. How can a blanket statement that values have declined meet the requirements of FIRREA for appraisal standards when this valuation is not based on the customer or home’s individual status, but on generic neighborhood information?
2. Does the bank having general knowledge of declining home values in a neighborhood provide enough documentation for a particular customer/home to meet the requirements of 226.5b(f)(3)(vi)(A) to reduce the HELOC without the customer’s consent.
3. If the bank does reduce the HELOC because of the declining home value, and that new value places the loan to value ratios over 90%, for example, wouldn’t the bank also have to begin reporting that credit in its “buckets” for increased LTV, even though the only appraisal the bank has maybe the original one showing the higher valuation?

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Lending Compliance
#1132252 - 02/19/09 12:22 AM Re: HELOC's, Appraisals and FIRREA YHWB
rlcarey Online
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Joined: Jul 2001
Posts: 83,782
Galveston, TX
Your questions are fully addressed in this FIL:
The opinions expressed here should not be construed to be those of my employer:

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