Yesterday while at a REALTOR tour a lender stood up and told us one of his client’s banks had closed his home line of credit (also known as a HELOC in the lending world) without warning.  Apparently, 18 months ago when the gentlemen had taken out the line of credit the bank had estimated his house was worth 10% more than he owed on it, (90/10 ratio).  With the market depreciation that we have seen, a line of credit based on an appraisal done 12 months to 3 years ago would be obsolete.   It is very likely that if the gentlemen above could already owe more than his house is worth without even having any additional liabilities via his line of credit. 

My intention is not to cause a panic, however I have access to this information and I just thought some of you might want to be made aware of it.  If you are relying on that line of credit for something like a down payment on your next home, an upcoming wedding or trip, you might want to take a closer look and even talk to your financial institution.