Home Equity Loans Miami FL

There's probably no better time than the present to pull your credit report and scrutinize your creditworthiness, especially if you are considering a home equity loan.

If you already have an equity loan, read the small print. What's more, you may want to seek a professional to help guide you through what could be a shift away from the easy money that's helped fuel the housing boom in recent years.

More border-line borrowers could find applications for second mortgages declined and those who hold equity loans could find their lines of credit frozen or even canceled if their payment habits become questionable.

"If you are depending on a home equity loan and that is suddenly taken away it could cause you to lose your home," said Cindy Marcus, RE/MAX Santa Barbara, Montecito, Goleta, CA.

It's not yet clear how lenders will react, but federal monetary system regulators have issued guidelines that effectively tell lenders to tighten lending practices which, over the years, may have become too lax.

The Feds are particularly concerned about lenders' portfolios that are heavy with riskier home equity lines of credit loans (HELOC), including interest-only loans, loans with higher loan-to-value (LTV) and debt-to-income ratios, loans approved for borrowers with lower credit scores, loans secured with questionable appraisal methods, and so called "no-doc" loans written without documenting a borrower's assets, employment and income.

Those kinds of loans have become more and more popular to help borrowers afford to buy homes in the over-heated housing market of escalating prices.

Why the concern?

Here's the scoop and what you should do to deal with it.

Coinciding with heightened concerns about escalating home prices, industry fraud, the potential for higher interest rates and other issues that could factor into a housing market bubble bust, the Federal Reserve, along with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the National Credit Union Administration, recently issued " Credit Risk Management Guidance For Home Equity Lending."

The guidelines tell lenders to:

• Periodically refresh credit risk scores on all customers.

• Use behavioral scoring and borrower characteristics analysis to identify potential problem accounts.

• Periodically assess payment patterns, especially borrowers who make only minimum payments over a period of time or those who use the line of credit to make payments on the line of credit.

• Obtain updated information on a home's value when significant market factors indicate a potential decline in home values, or when the borrower's payment performance deteriorates and there's a greater reliance upon the home as collateral.

  "The Feds are saying ... these home equity products are going to experience high default rates that will trigger many more workouts and foreclosures. Workouts will devalue the investor's portfolio...