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Board of Governors of the Federal Reserve System
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Press Release

Federal Reserve Press Release

Release Date: August 6, 2009

For immediate release

Homeowners in all regions of the United States are seeing their home equity lines of credit (HELOCs) frozen or reduced and wondering what they can do about it. The Federal Reserve's latest "5 Tips" guide explains consumers' rights and lenders' responsibilities when credit lines are reduced and provides information for those seeking to have a credit line reinstated.

"5 Tips for Dealing with a Home Equity Line Freeze or Reduction" explains that lenders can lawfully reduce or limit a consumer's line of credit regardless of whether the consumer has made timely payments. However, the lender must send a written notice of the action no later than three business days after the freeze or reduction goes into effect.  The notice must include information about any other changes to the HELOC.

The freeze or reduction notice should include specific reasons for the action.  The most common reasons for modifying the terms of a HELOC are a decline in the home's value, or a change in financial circumstances. Understanding why a lender froze a credit line may help a consumer take steps to have it reinstated to the original amount. For example, a lender may not know that significant home improvements have been made that increased the home's value. Or, if a household's financial circumstances have changed for the worse, consumers should look for ways to rebuild their credit rating.

Consumers are urged to protect their credit history by acting responsibly and contacting the lender immediately if they have questions or concerns about a credit line freeze or reduction. Lenders must reinstate credit privileges when the conditions causing the freeze or reduction no longer exist.

"5 Tips for Dealing with a Home Equity Line Freeze or Reduction" can be found at It is one of several publications the Federal Reserve Board provides to help consumers make informed decisions involving home equity lines of credit.

Last update: August 6, 2009