Home Equity Line of Credits Frozen By Morgan Stanley
So, what happens when you own a property that has $50,000 in equity and your lender won’t let you tap into that equity with a home equity line of credit?
Well… that’s the question that a bunch of property owners are asking themselves right now because Morgan Stanley just announced this move to thousands of their borrowers this week.
Basically, Morgan Stanley has seen how the decline in values of many of their borrowers homes has effected their bottom line… (when the borrower borrows more than the property is worth) so Morgan Stanley doesn’t want to risk the market going down even more and taking even bigger losses.
My interpretation of this is that they are looking at each application on a case by case basis and will be pretty darn careful on which applications for home equity lines of credit they approve.
Will This Trickle To Other Lenders?
Who knows… but it sure may. With property values in some parts of the country still declining… and foreclosures still climbing… many banks may take this protective measure to make sure they don’t get caught with their shorts down again.
Check out the full article at MSNBC.
What do you think about this change? Will it affect real estate investors a whole lot or mostly the home owners? I’d love to hear your take on it… leave a comment below.
Here's A Few Related Articles...
- Estimating Property Values – This site is 1000% better than Zillow!
- Schumer wants government bail out for those in foreclosure… WHAT?!!
- Top 4 Ways the Fed Rate Cut Helps Real Estate Investors
- Tax Consequences of a “Short Sale” of Real Estate vs. Foreclosure
- Getting Financing For Your Real Estate Deals
Hey, my name is Trevor and I'm the founder of The REI Brain and a real estate investor since the age of 21. Right now, my focus in real estate investing is multi-family income properties and I have plans on moving more into the commercial real estate investment world in 2008 and beyond. 
So, it seems that if you have a home equity loan (line of credit) that you are using for RE investing, when you get cashed out on that money, it would not be wise to pay it back to the bank. They could turn around and close the account. This would affect my RE investing big time.
Hey Kathleen,
Yep… that’s a definite possibility… kinda scary huh?
I can definitely see why Morgan Stanley is taking this stance, they can only drown so much before you have to start fighting to stay afloat.
Anyhow, this shows the importance of why investors need to find private money lenders and get lines of credit away from their home equity lines. Quick reminder, later this month (on the 21st) we’re having a 100% full content no product pitch at all webinar on how to find private money lenders, how to structure the deals, etc. Just join our newsletter (the box in the upper right) and I’ll let you know the call in details.
Thanks for the comment!
Cheers,
- Trevor