800 Credit Score, Strong Income, Strong Assets Not Enough To Save HELOC

Within the last few weeks, I wrote a post titled and asking the question, “790s Credit Score Barely Enough In Today’s Loan Market?” I answered expressing the hope that the answer was still yes. But that’s looking premature.

SFGate, the website of the San Francisco Chronicle, featured an article yesterday titled, “Lenders retreat as market plummets.” It led with the story of Brent Meyers and his experience with his HELOC. Meyers sounds like he couldn’t be doing better in terms of having a strong financial record:

A well-paid chief executive . . . he owns a substantial investment portfolio . . . pays his bills on time and has no credit card debt. His credit score, he says, is around 800, a rating more or less in the stratosphere.

Nevertheless, the article reports that Bank of America cut off his HELOC, “citing a decline in the value of his property.” It’s not quite clear how much notice Meyers got, but it sounds like he ended up hung out to dry. He’d apparently started a $75,000 landscaping project that he’d intended to finance with the HELOC—and was instead trying to rework his assets to pay cash.

It sounds like it doesn’t matter how good your personal finances look—valuation is driving the bus. And after the questions raised in the subprime mortgage crisis, lenders appear to be revamping their valuation practices left and right. For Meyers, Bank of America assessed the current value of his home at $1.09 million—down from a November 2006 valuation of $1.475 million in connection with Meyers opening the HELOC—presumably one that Bank of America signed off on and relied upon at that time.

A 26% decline in about 16 months? Other sources suggest median prices in Meyers’ part of the country dropped only 11.6% from February 2007 to March 2008 (see Inside Bay Area article titled, “Home sales, prices drop”)—a period pretty close to the Meyers’. Are things that much worse for the particulars of Meyers’ house or more specific neighborhood—or is Bank of America tacitly admitting that the original $1.475 million valuation was suspect?

Either way, it’s no help to Meyers.

To follow up on our own story, it’s been around eight weeks since we began the application process to increase the available credit on our HELOC (which became an application to replace the HELOC altogether). Though I had reported “conditional approval” a few weeks ago, the latest snafu was that the bank turned out to have a policy that its valuation used as the basis for an application is only good for a fixed time—which expired. In the new valuation, the bank decided that our home value had dropped $10,000 over the past six or seven weeks, so it cut back the amount of the HELOC that it was approving.

Supposedly, we’re all on track. Again. And again, we’re not counting any chickens—and we’re making some contingency plans. Meyers’ story hits a little too close to home (no pun intended).

Have others had recent experiences seeking mortgages or HELOCs on which they can report?

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790s Credit Score Barely Enough In Today’s Loan Market?