by 
The Curious Bag
-
A home equity line of credit (HELOC) is based on the amount of equity you have in your home. Equity is determined by your home's value less the amount left on your mortgage.
Significance
If your bank freezes your home equity line of credit, it means that you can no longer draw on the line and do not have access to the money. You must continue to pay back the loan.
Home Value
If your home value decreases significantly, so does your equity. This may cause your bank to freeze your HELOC as your home's value is the collateral.
Negative Equity
Home values dropped dramatically in some areas in 2008-09, causing homeowners to have negative equity which means they owe more than their home is worth. This could cause a freeze on your HELOC.
Credit
If the bank determines there has been a significant change in your financial circumstances, such as job loss, it may freeze your HELOC to minimize its risk.
Warning
If your HELOC has been frozen, be sure you continue to pay on time particularly if you have deposit accounts at the same bank. The lender can transfer funds, without your permission, to pay back a defaulted loan.
Source:
Comptroller of Currency: Right of offset
RELATED QUESTIONS
Copyright 2023, Wired Ivy, LLC