We are refinancing our 30 yr mortgage to a 15 year fixed. Got a great rate, and it's all on hold since Chase, who we have a HELOC with at prime+0%, sent us a subordination review in which they cut our credit line by more than 50%. This is the money we planned to use for our addition, and it's just evaporated. Not 3 months ago they reviewed our account and renewed our full credit line!! About a month ago, before going forward w/ the refi, I called Chase to specifically ask about whether we'd be jeopardizing our HELOC in any way in the subordination process, and was reassured by 2 people there that as long as our appraisal confirmed that we retained an 80% CLTV on the borrowed amount (we did), all would be approved. Now they're saying that all subordinations and new refi's are going at 60% CLTV, not 80%, since they changed their policy in January 09. So we got bad information from their people about our HELOC subordination, and now they've sent us a form to go forward, which characterizes the credit decrease as a REQUEST for credit decrease by us!! Not a decrease in credit initiated or imposed upon us by Chase, but as though WE are asking for this, which we are NOT!! We don't want to sign this form, and I've called them and requested they send us the appropriate form that accurately states the current conditions of the decrease in credit adjustment. We are not requesting a downgrade in credit, Chase has changed their policy and has informed us that our credit line is being cut. The upshot of this whole ordeal is that if we can't come up with enough money elsewhere to do this remodel, we'll have to refinance our HELOC at a higher rate. On the form it specifically states that in order to increase the credit line, we'd have to reapply for a new HELoc with them (yeah, that's gonna happen!). thanks a lot! We're losing more than half of our credit, and if we want more later, we have to give up our lower interest rate by refinancing at today's rates, 1-3% higher. While clearly the bank has the right to decrease credit lines in this economy, do they also have the right to expect clients to sign documents that falsely state the conditions under which the credit line decrease is being imposed? What can we do here to solve this dilemma? We qualify financially to pay what we owe, and our remodel will increase the value of our home. We feel like Chase is reneging on our credit agreement, by stating that, if we agree to (or in Chase's terms on this bogus form, request to..) this cut in credit, a future increase in this credit line will not be an option, regardless of whether it is within the range of our current credit limit that we have held for 6 years, or our CLTV improves.
Chase did the same thing to me: lowered my limit in the middle of a credit transaction, which canceled the transaction and caused an over-limit fee. Never. Again. Take your business elsewhere. There are plenty of places that will treat you like a human being and not some sheep out to be fleeced.
I'm not aware of anything you can do about it but if I were in your shoes I'd think about holding off on the remodel project for a while. Going into debt right now is a very bad idea. Most people seem to think that the recession is over and we can get back to business as usual but that is far, far from the truth. Government is doing everything it can to trash the dollar right now. Gold is going through the roof and will probably double in price before much longer. The price of oil is skyrocketing too now and we will soon be seeing much higher prices at the pumps. Banks are not lending money but rather they are investing all they can in other types of investments. We are facing another round of foreclosures that will make the last one look like a Sunday school picnic. That should start before the end of the year if it hasn't already. You are thinking that your remodel efforts will increase the value of your home. It may very well do so in your eyes but if nobody is buying homes then your money and hard work will simply vanish overnight. Cities hardest hit such as Flint and Detroit Michigan and others are rapidly becoming ghost towns. The cities are bulldozing large areas of homes and returning the land to it's natural state in order to cut infrastructure expenses. Once the areas hardest hit by foreclosure are cleared they won't need as many police and fewer firemen as well as other city employees. Maybe they are actually doing you a big favor even if you don't see it that way right now.
