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| Washington Mutual Inc. has reduced available credit for its home-equity line-of-credit borrowers by $6 billion as a result of slumping real estate markets.
In a recent filing with the Securities and Exchange Commission, the Seattle-based company noted it went from using data from the prior three years to analyzing data from just the past year to estimate defaults and losses on its HELOC, home-equity loan and subprime portfolios. The updated assumptions led to $1.2 billion in first-quarter provisions. “By providing greater emphasis to more recent default data, the allowance for loan losses better reflects the evolving risk profile of the loan portfolios,” the filing stated. WaMu also said it reduced or suspended $6 billion in available credit of HELOCs during the first quarter as a result of the deteriorating U.S. housing market. The move left it with $51 billion in unfunded HELOC commitments. Its portfolio of HELOCs and HELs stood at $184.4 billion on March 31. Spokeswoman Sara Gaugl explained to MortgageDaily.com that the thrift regularly reviews its HELOC portfolio and makes appropriate adjustments. She said other mortgage lenders are also reducing available credit on HELOCs in light of the current housing market and declining values. “WaMu has had programs in place for years that actively manage the amount of credit we extend to our customers, both at origination and during the term of their loan,” she said. “In line with the ongoing management of our customers’ home-equity lines-of-credit, we will increase, decrease or suspend lines based on a number of factors, including a customer’s entire relationship with WaMu, their payment status and history, changes to their creditworthiness, and changes in the value of their property.” She noted that most of the borrowers who saw their lines decreased continue to have access to available credit. “We will continue to evaluate individual home equity lines of credit in relationship to the amount of equity a customer has in their home, and if appropriate, will lower the line amount according to WaMu’s line management guidelines,” she added. Gaugl said WaMu has a process in place for impacted borrowers to appeal their credit line decreases. |
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Sam Garcia worked in mortgage lending for twenty years prior to becoming publisher of MortgageDaily.com. e-mail:Â mtgsam@aol.com |
