WaMu lowers limits on HELOCs

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Various blogs have been popping in the past 24 hours with rumors that Washington Mutual would be lowering limits on existing home equity lines of credit. It turns out there is some truth to the rumors -- WaMu is in fact lowering the amount of some existing HELOCs, but not as sharply as some bloggers have predicted.

Here’s a sample comment from the discussion board at Zillow.com: ‘Washington Mutual customers are in for an ugly Christmas surprise from their bank. WaMu plans to start reducing existing home equity lines of credit (HELOC) as early as this week without notifying their customers prior to doing so. ... Here is an example of how it will go down. If you owe $50,000 on a heloc and WaMu reduces your limit to $40,000 then you have $10,000 due immediately.’

Reality check: WaMu tells L.A. Land that’s not true, though it is making some changes in HELOCs. This from WaMu spokesman Alan Gulick: ‘What you are hearing is part of our normal course of business for the ongoing management of the credit we extend our customers. ... We do have an enhancement to our program going in place this week and we contact customers in accordance with our agreements and as we always do when there is a change to their account. ... I can confirm that we are lowering the excess line amount to a level that is above the current balance -- we did not block or terminate credit lines.’

While I’m on the subject, investors are very sour on WaMu at the moment. Its shares fell a new low today, trading as low as $13.50 before closing at $13.54 -- that’s a decline of 71% over the past year.

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