CSBJ Daily

If you need a home equity line of credit, it might help to know that the Federal Deposit Insurance Corp. has urged institutions to work with existing borrowers to mitigate financial hardships arising from home equity lines of credit reductions or suspensions.

The FDIC issued guidelines to financial institutions that – for risk-management purposes – might reduce or suspend home equity lines of credit.

Certain legal requirements designed to protect consumers must be followed.

“Regulation Z, implementing the Truth in Lending Act, permits lenders to reduce the credit limit or suspend further extensions of credit if the value of the dwelling securing the loan declines significantly, or if a consumer is likely to be unable to meet his or her obligations as a result of a material change in his or her financial circumstances,” FDIC officials wrote in a letter to financial institutions.

But, “compliance with Regulation B and the Fair Housing Act requires lenders to calculate revised property values and determine borrower financial circumstances using consistently applied fact-based methods, and implement any resulting limitations without regard to prohibited factors.”

The FDIC’s announcement might make it easier for homeowners to obtain the loans they need, given the current economy.