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LOS ANGELES, Aug. 6 - The practice by large U.S. national banks of suspending and reducing the home equity line of credit (HELOC) has prompted investigation by California's State Assembly, but the banks have refused to cooperate.
HELOC is a form of secured credit tied to the value of property. Under common contract terms
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Large national banks with a substantial presence in California, including Chase, Citibank, Wells Fargo and the Bank of America, refused to explain their justification for tying up of millions of U.S. dollars of credit throughout the State at a hearing scheduled for this week.
The hearing
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"It's very frustrating," said California Assemblyman Ted Lieu, Chairman of the Assembly Select Committee on Consumer Financial Protection.
"I have heard from many constituents who have had their HELOCs stripped away from them, often without any apparent legitimate basis," Lieu said in a statement.
"The banks owe the people of the State of California an explanation for these credit line suspensions that have had significant adverse effects on individuals, families and the California economy."
"It's very suspicious that the banks would turn down an opportunity to explain themselves," Lieu said.
Large national and regional banks have been suspending HELOCs and reducing credit lines since 2008 at least, as a result of declines in the values of the properties securing those credit lines.
But many borrowers and consumer advocates say the banks have gone too far -- suspending HELOCs en masse for their own benefit and often in the absence of circumstances warranting such suspensions.
Many of these banks have been sued in California and other states for engaging in HELOC practices allegedly violating federal regulations and state consumer protection statutes.
"There were plenty of borrowers and consumer advocates lining up to give their side of the story," Lieu said.
"The primary purpose of the hearing was to ask important questions of the banks and to seek some accountability. The banks apparently have something to hide," he said.
"As long as this HELOC suspension issue persists, I will continue to demand answers and to insist that California borrowers receive the fair and legal treatment that they deserve
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Many American homeowners have received letters recently from banks that said their HELOCs would be reduced because their homes have depreciated.
Experts advised that, if homeowners got one of those letters, they could either continue with the smaller line of credit, or pay for an independent appraisal of their homes.
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