As if we needed further proof that the housing market sucks..
May 22nd, 2008 by ariana
We got this letter in the mail from HSBC:
Dear Ariana & Jeff,
Subject: Home Equity Line of Credit Account
We periodically review Home Equity accounts. As part of that process, an Automated Valuation Model (AVM) showed a mterial decline in your property value since your account was opened. Under the terms of your Line Agreement, we are permitted to suspend your line of credit. Effective immediately, you will no longer be able to advance additional funds on the account.
If your property value increases, you may send a written request for a reinstatement of this account.
We value you as a customer blah blah blah etc etc.
Luckily we don’t need to and didn’t plan to take out more equity (we have a fixed rate HELOC that we used for the 20% of our loan), and I’m not sure why they would have ever given it to us given that what we already have out plus the 80% fixed rate mortgage we have is pretty much exactly what the bank valued our house at… but still, it’s kind of a brutal reality check.
I don’t know why or on what they are basing the “material decline of our property” because when I do a search of housing sales in our area there isn’t a noticeable decline at all. Yes, houses are staying on the market longer but the prices in Rockland County haven’t really dropped all that much that I can discern. We’re lucky that way I guess, I heard that nearby Westchester has had a 15-20% decline. When you’re never “hot” you can’t get that “cold” either.
The bank also doesn’t know about the upgrades and improvements we’ve done, though they base so much of it on square footage that I’m not sure our upgrades would actually change anything at all.
Sometimes I think we would have been better off renting!
Don’t stress. Real estate is a cyclical business…sometimes its up or in the case of the past few years way up, sometimes its down.
If you have no plans of moving anytime soon, Im sure you’ll be feeling good about your purchase a few years down the road. You just have to wait out the bad times to get to the good.
in some neighborhoods here (south east florida) the houses have dropped in value up to 50% – perfect for someone looking for a fixer-up (like me) – but you’re still never better off rent if you can help it
So I so feel where you are on this. My husband and I bought in Febuary of 07…right before this all happened. Now we cant get rid of our PMI to save our life.
and to add isnult to injury.. a gorgeous new apartment complex completed right beside us… with all the amenities you could ever think of… their rent.. is less my mortgage and maintenace… in my amenity free condo! boohiss… lol
I just read an article that tons of mortgage companies and banks are closing HELOC’s just to be on the safe side. We got a very similar letter, even though we owe less than $20,000 on our house and have even used the line of credit.
Don’t take it personally. The bank didn’t look at your situation at all.
Mrs. Limestone, I HOPE we are ok staying for a while.. if we are fortunate enough to conceive again (which I don’t think we’ll wait more than a year after this one to try) the house will definitely be too small.
We’ve considered the possibility of adding on, but are a little hesitant putting more money into the house given that the neighborhood is a wee bit sketchy..as much as we love our house, we sort of ruled out adding on in favor of moving where our investment would be more likely to pay off.
Laur, I am familiar with the SFL. real estate market.. we seriously considered buying the bungalow we were renting in Victoria Park (fort lauderdale) before we moved back to NY. I thank god that we didn’t, but when I recently checked on homesales in that neighborhood, all the houses were still selling for 600,000-800,000. But those “recession proof” neighborhoods are rare and I know plenty of people (my father in law included) who lost about 50% of their home value. It’s terrible.
Don’t be discouraged. The market is a touchy subject with banks, and lenders right now. I am sure if your house was appraised for selling right now it would come in just fine, and much better than the AVM. They are just protecting their butts. I see/read this stuff all day long, don’t fret…it’s just a softer market so places are tightening down, and holding onto as much loot as possible.
Laur – you are in the perfect place for a steal of deal in FL!
Ouch! What an odd/awkward letter for a financial institution to put out.
I know this is blasphmous for a home blogger to say but let me just rant on this pet peeve of mine: When did it become child abuse for children to share a room? Or – god forbid – a family share a bathroom.
My brother and I shared a room for most of my childhood and we could not be closer. Then when my father remarried, there were 7 of us in a 3 bedroom, 1 bathroom house and we felt like we were living large (our house before had only 2 bedrooms). To be clear – we were middle class and lived much like the rest of our neighbors did. We learned to take turns.
I know the standards are different now – every child must have their own space plus a playroom and a family room and a swing set and 1000 sq feet of grass to play on. But I don’t know who made that so because of all the problems a child could have growing up – sharing space with the people that love him/her is hardly something I’d be too concerned about.
Ok, end of rant. Can you tell this is something that drives me crazy?
Just wanted to commiserate with you. We got the SAME letter in the mail from Chase and it just annoyed me. We are in the same boat in that we wouldn’t have even thought of taking more money out and that they don’t know the improvements of the house. They valued our house at $30K less than houses are selling in our neighborhood!
I’ve decided to just ignore it. I wasn’t planning on doing anything else with it anyway.
I’m glad that we’re not the only ones who got these annoying letters. That does make me feel better. Speaking of which, did anyone catch the recent This Amercian Life episode about the mortgage meltdown? http://www.thislife.org/Radio_.....sched=1242
Mrs. Limestone, it’s not that we would care if 2 kids shared the same room, but our upstairs bedrooms are so small that there is quite literally not enough space in the one room for a bed and a crib, or two beds.. not if you wanted to be able to walk through the room! I don’t know that you can tell from our pictures, but our entire house is just over 1300 square feet, the majority of that is downstairs because the upstairs is only half a story.
According to area comps, our mortgage broker and Zillow.com, our house has dropped about $50k in value. This breaks my heart because my husband already feels like we paid too much (he thinks we should have played hardball with the realtor and stayed at asking versus going up and over). I love our house, don’t love our neighborhood, and now I just feel like we’re locked in forever because as long as the market is like this, no one is going to move into this neighborhood. We had planned on staying here five years; it’s looking like 10 now according to the “professionals.” I guess then, that I should hunker down and get nice and cozy here. Upgrades, commence!
The same thing happened to me. Thankfully i didnt place my savings in there..i almost did, just so that it would lower my monthly payments.
We only had a few thousand in there for emergencies…now we had to start back to square one…very upsetting reality.
Jen Ramos
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I didn’t mean to aim my comments at you specifically – its just one of those things that I don’t understand. Im sure you have very good reasons for needing more space and there is nothing wrong with wanting more room at all.
If you have to stay there a little longer, just think of it as payoff for all the hard work you’re doing now. You’ve invested a lot of your time and effort in – might as well give the house some time to pay you back :)
Casacaudill, we didn’t really bargain down from the asking price of our house either (at my insistence!) and I’m sure we overpaid as well. Hunker down indeed..
Mrs. Limestone, I knew you weren’t picking on me ;) Honestly the thought of moving is totally unappealing to me anyway, particularly because as you say we need some time to enjoy the house. I don’t know if I’ll feel the same way in 3-4 years, but we’ll see. I just really really hope the neighborhood turns around a little in the meantime.