Letter Re: Countrywide Turns Off the Home Equity Lines of Credit Tap

I just received an email from my Countrywide Account Executive that they are suspending further draws against Home Equity lines [of credit]. They have reportedly started mailing suspension letters last week to 122,000 borrowers. Who knows how many more could get those based on the markets and Countrywide’s present situation. If you know someone who has [a home equity line of credit] and is going to need the funds, they might want to draw out the money right away and put it somewhere safe. A lot of people use home equity lines as emergency funds. – MB in Boise

JWR Replies: That is a useful data point. It is indicative that the nascent recession will be deep and lengthy. Sadly, it has been consumer credit that has kept the US economy afloat. I wouldn’t be surprised if other home mortgage lenders follow suit.

OBTW, as previously mentioned in the blog, I do not recommend taking on additional debt, except in exceptional circumstances such as a stay in a hospital. When the layoffs come, debt servicing will be at least problematic. It may even be catastrophic.