Following in the footsteps of Bank of America and Countrywide, Washington Mutual is pulling the plug on scores of existing home equity lines, according to a report from the San Francisco Business Times.
The Seattle-based thrift and mortgage lender will begin sending out letters to homeowners notifying them that their home equity lines of credit will be reduced or shut off completely, depending upon where they live and perhaps their current loan to value ratio.
WaMu has apparently reduced the amount of home equity able to be tapped from customer’s homes by a whopping $6 billion to mitigate risk in depreciating markets, regardless of credit profile.
But the bank defended its position, claiming that the move will also protect homeowners and prevent them from falling underwater if home prices continue to sink.
Additionally, it said it has a process in place for those looking to appeal the decision, and has pledged to assist those with special circumstances.
The move comes as the mighty savings and loan continues to struggle amid the ongoing mortgage crisis, with many of its loans made in rapidly depreciating areas of California.
Last month, WaMu unveiled plans to exit wholesale lending, cut 3,000 jobs, shut all its freestanding home loan offices, slash its dividend to a penny, and raise $7 billion via a TPG investment after reporting a $1 billion loss.
That’s on top of the 3,000 previous job cuts that took place back in December 2007 when the bank halted subprime lending.
Home equity line losses have rattled a slew of banks in recent quarters, forcing most to withdraw the products altogether.
Shares of WaMu fell 18 cents, or 1.74%, to $10.14 in midday trading on Wall Street.