Home Equity Lines of Credit (HELOC) issued by Countrywide, Bank of America, Washington Mutual and Indymac are being frozen nationwide, targeting mainly cities where property values are declining. Major cities targeted include Los Angeles, Las Vegas and Chicago. According to Bloomberg, about 600,000 home equity lines of credit have been frozen nationwide thus far. With $1.1 trillion in home equity loans outstanding, lenders are starting to lock down further withdrawals from HELOCs, regardless of the borrower's credit score or payment history. Las Vegas is feeling the pain of this HELOC lock-down more than most. With Nevada being the highest foreclosure state in March and Las Vegas home prices falling by 23% in February, retailers are struggling to survive as homeowners pinch pennies to stay afloat. Retail sales in Clark County (which includes Las Vegas) dropped over 3% from the prior year's figures, with furniture stores reporting declines of 13%. Now that Bank of America's purchase of Countrywide is at risk of being either abandoned or modified, it's anybody's guess how many more HELOCs will be frozen before this is over. According to the Los Angeles Times, Friedman, Billings, Ramsey & Co. reported that BofA "should completely walk away from the CFC deal" and predicted it would instead "renegotiate the transaction down to the $0 to $2 level." The impact on business owners is hard to measure, since many rely on funds from HELOCs to finance business operations and expansions. Many of these HELOC lock-downs are not being discovered by borrowers until a check written against their HELOC account bounces. These lock-downs can either be in the form of a temporary suspension or a reduction in the overall line of credit. Many borrowers with excellent credit and payment histories are saying that they are being penalized for the bank's errors with other borrowers. What can you do if your HELOC is frozen? According to Money Magazine, these are the steps you should take: - Request a defrost: Most banks use automated systems to lock accounts. Ask why your account was suspended and how you can appeal the suspension.
- Check your home's value: If your home's value is still above your total mortgage and credit line, gather information to support this and ask the bank to review the freeze.
- Check your credit score: Some automated systems will lock down credit lines because of a change in a borrower's FICO score. If your score is still high, ask the lender to reinstate your credit line.
- Avoid a total freeze: Ask for a lower equity line rather than a total freeze.
- Shop around: If you have at least 10% equity in your home and a good credit score, you may be able to find another lender who will restore your credit line.
If your HELOC has not yet been frozen, now may be the time to draw funds from that account for costs such as college tuitions, remodeling, business expansion or medical costs. You'll pay interest on the funds you've drawn, so be sure to withdraw only what's needed and deposit those funds into an interest-bearing account until the actual bills are due. | 
