New York —
A HELOC allows you to apply for a special home work loan equivalent to what you have already paid from your home
In uncertain times, home renovation lines of credit are high-risk products for banks.
MANDEL NGAN / . / .
Wells Fargo, one of the largest home lenders and the fourth largest bank in assets in the United States, reported that it will stop granting lines of credit for home remodeling due to the crisis of uncertainty caused by the coronavirus pandemic.
The bank released the information to its mortgage staff through a conference call that was confirmed by company spokesman Tom Goyda.
“Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit (HELOC) after April 30,” the bank said in a statement, the . agency reported.
A home equity line of credit (HELOC), allows you to request a special loan to remodel your home and is equivalent to what you have already paid for your house, without generating an extraordinary debt apart from that of your mortgage and is flexible in your payments.
HELOC credits are equivalent to using a credit card to which payments with interest will be credited for the amount you requested.
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Banks have been withdrawing housing-related loans as the pandemic of the COVID-19 it is impacting its value and the creditworthiness of borrowers.
Just early last month, JPMorgan Chase reported that it lowered the HELOC and tightened conditions for mortgage procedures, requesting larger down payments on new loans.
HELOCs are some of the highest risk products for banks during tough economic times, because during a foreclosure, the lender, who made the primary mortgage, is the first in line to receive a recovery payment.
When a bank approves the HELOC of your property, you have a certain time to withdraw that amount, and although its duration may vary, the time is similar to that of a 30-year mortgage.
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Wells Fargo’s announcement will impact bank customers who have been waiting to obtain a line of credit based on the capital they had on their properties.
Now that money could be used for an emergency fund for people who have lost their jobs or whose businesses have closed in the midst of the coronavirus crisis.
In the report, the bank said that the suspension of HELOCs “will continue until analysis of market conditions indicates that it is appropriate to resume credit lines for owners.”
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