Some 122,000 Countrywide borrowers got an unpleasant surprise this week when they were told that they could no longer draw on their home equity lines of credit.
According to a letter obtained by Mortgage Implode, those who received the notices had either experienced a significant decline in their property value, been delinquent in paying their monthly mortgage payments, failed to pay property taxes or insurance, or violated certain terms associated with the loan.
One example given in the letter is a situation in which a borrower claims a property is their primary residence during loan origination, only for Countrywide to later discover that the property is in fact non-owner occupied.
Countrywide said other reasons not listed in the memo could spark similar action, and that the move wasn’t temporary, but rather an ongoing policy.
According to the LA times, Countrywide is using “computer modeling” to determine which customers are upside down on their mortgages to determine who will lose the right to withdraw money from their credit lines.
Chase to Tighten Guidelines on Second Mortgages
According to a memo sent to mortgage brokers this week, Chase is reducing the maximum combined-loan-to-value on second mortgages because of falling property values.
Beginning Monday, the New York-based bank and mortgage lender will no longer originate loans exceeding 85 percent CLTV on primary residences.
“Chase is committed to remaining in the wholesale business and in doing such, finds that we cannot afford to be in a position of lending at or above 100% loan-to-value, especially after accounting for falling home prices,” the memo said.
The bank is also reducing the max debt-to-income ratio to 40% for purchases and refinances for borrowers with credit scores below 700 and requiring that properties be off the market for 180 days to be eligible for a refinance.
IndyMac Limits Super Jumbo Lending
In related news, IndyMac released a memo yesterday saying it would limit super jumbo loan amounts to $2 million, and will no longer accept stated income documentation.
Borrowers who are able to provide full documentation will be limited to a maximum DTI of 40 percent, down from a previous 50 percent.
The Pasadena-based lender said the move would result in improved pricing on related products.