PORTLAND, Ore. — It wasn’t long ago when people were tapping the equity in their homes to pay bills.
Now many of those home equity loans are being frozen by lenders because home values are dropping.
It happened to Debbie Inguagiato who runs a massage therapy business out of her home. She says after 15 years of never missing a loan payment and creating a very high credit rating, shes about to lose her house.
“I don’t think i have ever been this scared in my entire life”, said Inguagiato.
She said a mortgage broker gave her some terrible advice as she was going blind from an eye disease.
Inguagioto said, “I was advised by someone who said she was living off equity of her home for 25 years. She told me she knew what she was doing and she led me through this process of getting a home equity loan.”
Inguagioto used the loan to help pay her first mortgage and start her massage business which has been very slow.
Then, late this summer that home equity loan was frozen because her lender claimed her home plunged in value.
Mortgage companies based in other parts of the country are not always fair when they freeze home equity loans in the Northwest according to realtor and attorney Holly Hummel.
“Your dealing with someone in another part of the country pulling up data on a desktop appaisal that may not take into consideration that you have a brand new kitchen,” said Hummel.
She says while real estate values have certainly dropped in suburban communities like happy valley homes in much of Portland have held up well. Debbie’s home is in one of North Portland’s hottest neighborhoods.
Her home was appraised at $430,000 when she took out the equity loan 2 years ago. However, she says her lender told her the value had dropped to just $262,000, so they froze her loan.
Debbie doesn’t buy it and nor do Portland real estate experts who say the best thing homeowners in this situation can do is immediately contact their lenders.
Hummel said, “I have seen people renegotiate with their lender and have their lender come around to their way of thinking, that in fact their house has not dropped to that level.”
Ronald Stroble, Vice President of Oregon based Umpqua banks mortgage division, said lenders are now working closely with homeowners looking to avoid foreclosure.
Stroble said, “In the old days people thought they cant call lenders because they didn’t want them to know they were having financial trouble. The message to everyone in this financial meltdown is please, call your lender. Find out what options you have.”
Debbie has sent her lender comparable sales in her neighborhood and a new appraisal showing her home is still worth about $420,000.
She’s still waiting to hear back from her lender, Popular Mortgage Servicing Inc.
The New Jersey based company did not return calls from Newschannel 8.
Inguagiato said, “I’ve never been homeless, I plan not to be, but the reality is I don’t know how long a legally blind person would make it out there on the street and I don’t want to learn.”
The mortgage crisis is close to claiming another victim, but Inguagiato is not giving in without exploring every possible option.
If you find yourself in the same home equity loan is frozen and your lender won’t renegotiate, another viable option is to approach local banks and credit unions.
Most local financial institutions had light sub-prime loan exposure and still have plenty of money to loan if you qualify.