American Banker (07/02/08) P. 20; Adler, Joe
Financial institutions may face legal restrictions when attempting to freeze or reduce a home equity line of credit of a borrower, the Federal Deposit Insurance Corp. warns in a June 26 letter. Failure to comply with the various laws could lead to enforcement action and have a negative impact on their standing under the Community Reinvestment Act. The guidance suggests that smaller institutions are now joining their larger counterparts in responding to the increased risk of low home values and delinquencies by revising home equity lines. "In addition to ensuring legal compliance, the FDIC urges institutions to adopt best practices for working with borrowers who may experience financial hardship or significant inconvenience as a result of a reduction or suspension of their credit limits," says the letter.
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