I own a home and I have been paying my mortgage regularly.  When property values increased I took out an equity line of credit which I have been paying.  However, the value of my home has now fallen to less than the total amount that I owe on the two loans.  Can any of my lenders call their loans and require me to pay immediately?

Most lenders today are very happy if you are paying and they do not look for a reason to foreclose.  So, even if they could call your loans for that reason  it would be unlikely, at least in this environment, that they would.  There is nothing in the standard Fannie Mae/Freddie Mac mortgage which would give the lender the right to call your loan simply because the value of your property had dropped. A bank may wish to call your loan because if, in fact, your home were appraised and it showed that the value was less than what the mortgages are, because the bank would have to write down the asset value of the mortgage it holds because it is not fully secured.  That is what happened in the early 1990's when the banks were holding mortgages commercial mortgages and the regulators would come in and require the lender to take a reserve on their balance sheet for a potential loss because their loans were not fully secured. That prompted a lot of banks at the time to try to find a reason to call the loan and many of them did call the loan on customers who were current on their payment obligations because the bank was required to take a "hit" on its financial statement, and as a consequence it would call the loan to try to get rid of it.  So our advice is, keep paying your mortgage loans and, hopefully, prices will go back up to where they were at the time you took out your equity line.


If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.