Class Action Lawsuits For Auto Freeze of a HELOC?

A couple of years ago the banks started freezing Home Equity Line of Credit (HELOC) loans. They saw the values going down and just either froze them or reduced how much the homeowner could then borrow. A great article in the LA Times, that I read this morning, suggests that it would be challenging for any homeowners in the midst of remodeling their home to lose what they thought they had, without a complete valuation by appraisal, to pay the contractors, suppliers, etc. And, therefor the lawyers are considering filing lawsuits....and, quite possibly, that there will be enough claimants for a class action suit.

Yes, I agree that would be a huge challenge if you were in the middle of a remodel. However, I also would suggest that many homeowners that had HELOC's were used as a 2nd when they purchased their home in the height. They may have paid down some of that HELOC already and the banks certainly wouldn't want them using any more of it since they are most definitely upside down. Freeze.

I also would think that many homeowners had opened a HELOC in the presumption of doing work on their house, paying for college, buying a new car. That type of thing. And, many of those homeowners that may not have contracted yet, chose to pull the money out....indicating they were going to use it for remodeling and putting equity back into the home.....when, as the market fell......they may have chosen just to keep that cash. Freeze them too.

Full article here:

Litigation Regarding Freezing of HELOC's

Now, mind you, I've got clients that are attorneys and I do believe they should fight for people that have been wronged. The good ones do. But, I do feel, all too often, we see legal situations where one party was really protecting themselves and another thinks there is a way to make a quick big buck. And, those attorneys? Me no likey.

If you think your value was high enough to keep your HELOC at the level it was, then fight for it, of course. If you are just going along with the 'bandwagon'? Think again. We've got enough troubles with the financial institutions now, don't we?