Homeowners Losing Equity Lines

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As House Values Fall, Some Banks Withdraw Credit
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/22/AR2008022202987.html?hpid=topnews

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.

"I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

Several of the nation's largest lenders, along with smaller ones, are shutting off access to home equity lines in areas where home values are declining. It's an unusually aggressive move as the industry grapples with fallout from the mortgage crisis that began unfolding last year.

[halobeam]

1. Isn't that her choice if she can prove she can pay it?

I realize "tough times" is indicative that she might not have been able to, but sometimes people can pay the monthly, but not have enough money to pay outright for the things they wanted the loan for.

If my mortgage was 100,000 and my equity loan was 25,000 and the house was worth 85,000 because it's value dropped, that doesn't change my monthly payment or my ability to pay it.

Are they not taking in the ability to pay it, into consideration?

I don't really understand the housing market well, it just doesn't seem right, if I'm understanding this correctly.

[grilled onions]

2. It Seems She Was Already In Trouble

If she requires this "loan" just to get her kiddies into preschool what would she do if there was a radical medical problem? Would she also want to do the same to get the twins in grade school,high school etc? There are tough times ahead,there are always tough times ahead. But we can't expect to use our homes as ATM's as common practice. Years ago the only time people would try such a loan is if the roof threatened to fall in or other major home repair--not fancy upgrades. I don't remember anyone using such equity for daily bills unless it was a medical emergency.