Washington Mutual Cuts Home Equity Lines

Another bad news for people who need home equity loans with bad credit. Washington Mutual suspended and cut six billion in available home equity credit to their customers. WaMu is doing that in order to reduce the risk they take in a flailing housing market. They can't be blamed for that, home equity lines of credit were never a no-risk business.

If you are a Washington Mutual customer and haven't been notified of this, you probably will. All WaMu customers across US will learn of the newest change to their credit availability. Letter is on the way so be prepared to hear some bad news on your home equity line in the next several days. Of course, Washington Mutual declined to inform us on how many customers will be affected.

If a borrower’s home has depreciated, regardless of credit history, the line of credit will likely be reduced because the equity has fallen.

Seattle thrift reports $1.1 billion in bad home equity loans in the first quarter. That is 35 percent more from the same time the previous year. The company has a total of $9.2 billion in nonperforming assets for one quarter, which makes 2.9 percent of total assets. And those nonperforming assets are showing the measure of bad loans.

If we take a look on the home financing front elsewhere, the P-I had a column that contends next: although rates on the new conforming-jumbo loans have dropped down close to conforming loans, they’re still pretty hard to get. So, we are still in the same old boat, going even further in unknown direction when it comes to home equity lines, mortgage and bad credit.

With higher loan limits, which are set earlier this year by the federal government as part of an economic stimulus package, which are supposed to make jumbo loans more affordable in expensive housing markets. As expected, rates have come down on these jumbo conforming mortgages, but still these loans will remain hard for most borrowers to get. Lets wait and see what will happen in the next month with mortgage rates and home equity lines.