Congress Suspension of Home Equity Investigation

[Guest Joe Benny]

Dennis J. Kucinich, Chairman of the Domestic Policy Subcommittee, Oversight and Government Reform Committee, wrote today to nine large home equity lenders about their moves to suspend home equity lending in Northeast Ohio, one of the regions hardest hit by the wave of foreclosures.

 

Kucinich said, “My constituents have told me that banks lending in the Cleveland area have decided to suspend home equity lines of credit. This is very disturbing. People have had their home equity lines suspended whether their credit is good or not, and whether they have sufficient equity in their houses, or not. As Chairman of an investigative subcommittee in Congress, I can get answers from the banks. It is possible that our investigation will conclude that a suspension of credit is legal, but it is bad for the region and for the thousands of homeowners who borrow against their home equity to pay for college, emergencies and home improvement.”

 

The Domestic Policy Subcommittee has broad jurisdiction to investigate and conduct oversight. The Subcommittee has held five hearings since 2007 on the effects of foreclosure and the collapse of subprime mortgages. Two weeks ago, the House agreed to an amendment offered by Chairman Kucinich to target federal funds to the neediest neighborhoods affected by rising rates of vacant and abandoned houses.

 

The Subcommittee’s letter was sent to the following lending institutions: AmTrust, KeyCorp., National City Bank, Charter One Bank, Wells Fargo, Fifth Third Bank, Huntington National Bank, CitiFinancial, and JPMorgan Chase Bank. Other lenders may receive similar inquiries.

 

The text of the letter follows:

 

 

 

 

May 29, 2008

 

 

Robert Goldberg

President and Chief Executive Officer

AmTrust Bank

1801 East 9th Street, Suite 200

Cleveland, OH 44114

 

Dear Mr. Goldberg:

In connection with the Subcommittee’s investigation into bank lending and loss mitigation activities, I request that you provide answers to the following questions:

 

1) Borrowers in Northeast Ohio have already received notices from their lenders of a suspension in their home equity line of credit. If your institution has already notified borrowers of your intent to restrict HELOCs, what were the criteria you used to identify recipients of that notification? How many borrowers received such notifications, and where were these borrowers located, by zip code? Please also provide a copy of the notification and any attachments. What is the nature of the restriction?

 

2) If your institution has initiated or is considering a restriction in home equity lines of credit, tell us what basis for assessing housing values of your borrowers are you using specifically for the purpose of evaluating HELOCs? If this is a proprietary source, please explain the methodology and the name of the vendor.

 

3) What other loan products has your institution restricted, or is your institution considering restricting, and what steps, if any, has your institution taken in this regard?

 

The Oversight and Government Reform Committee is the principal oversight committee in the House of Representatives and has broad oversight jurisdiction as set forth in House Rule X. An attachment to this letter provides information on how to respond to the Subcommittee’s request. A “restriction in home equity lines of credit” means demand for repayment of existing withdrawals from home equity lines of credit, suspension from further withdrawals in the home equity line of credit, and/or changes in the eligibility criteria for a home equity line of credit.

 

If you have any questions regarding this request, please contact the subcommittee.

 

Sincerely,

/s/

Dennis J. Kucinich

Chairman

Domestic Policy Subcommittee

 

Enclosure

cc: Darrell Issa

Ranking Minority Member