SUB-PRIME MARKET AFFECTING HOME EQUITY LINES OF CREDIT

ORIGINALLY AIRED ON WSB-TV ON MARCH 31, 2008

THE SUB-PRIME HOUSING MELTDOWN HAS SNAGGED SOME NEW VICTIMS. PEOPLE WHO HAVE HOUSES, BUT DON'T HAVE SUB PRIME LOANS.

INSTEAD THEY HAVE HOME EQUITY LINES OF CREDIT.

CONSUMER ADVISOR CLARK HOWARD INTRODUCES US TO TWO HOMEOWNERS WHO USED THE LINES TO IMPROVE THEIR HOMES---AND NOW CAN'T TOUCH THEIR MONEY.

Kevin Crane lives on Lake Lanier. He has a dock, a boat and cars. But his only debt is his house and a home equity line of credit.

Kevin says, "I look at this as my main investment, and to finish my basement is to just put money in my investment, just as I would a 401(k) or an IRA."

Bank of America sells its equity lines as an easy way to remodel. The website says "access your money anywhere, anytime."

But Kevin learned the hard way that's not always true. Bank of America froze his line of credit with no prior warning.

"It was a line of credit for security and the security blanket was pulled."

Lynne Buell also has a Bank of America home equity line of credit. Despite her excellent credit record, her line too has been frozen. Lynne says, "It was like being slapped in the face."

Why did it happen? Bank of America's form letter says because of "declining home values."

The letter was dated March 4, 2008. Lynne and Kevin got the letters more than a week after their credit lines were frozen.

Both talked to customer service.

Here's Kevin's recollection of the conversation: "She said to me, I'm sorry but this is a part of the sub-prime crisis that we're going through, and I said, 'That's a crisis that you're going through. Not me. I have a 30-year fixed mortgage.'"

Lynne is also upset: "I think they may have escalated home values when they were issuing lines of credit and mortgages and now they're in trouble and now I think they're underestimating the values of our homes big time."

In a statement, Bank of America said "We understand these actions can represent a hardship for our customers. We will work with our customers with immediate or long-term needs as appropriate."

After a week of fussing, Kevin got access to another $10,000. But he's since switched banks.

"Wachovia opened me up immediately with a line of credit that was 25% larger than the one I had."

Lynne plans to fight Bank of America's claim about her falling home value.

In the meantime, she's received two letters from Bank of America -- not to resolve her current problem, but to try to sell her more debt! Lynne says she doesn't want the new debt.

"I don't trust them," Lynne says.

Bank of America won't tell us how many people will get letters like this, but other lenders, including Countrywide, are freezing equity lines, too.

Let's look at what happened over the years: Banks got really foolish with the home equity lines, pushing you to buy a car with one, take a vacation, buy a boat, use it for use it for whatever! The real problem is that we got into our heads that home equity lines are for the purpose they weren't designed for: lifestyle. What's a home equity line for? It's for improving your home. Don't use it as a piggy bank and do not treat your house as an A.T.M.

I'm Clark Howard, Channel 2 Action News.