LOS ANGELES (KTLA) – With the devastating Palisades Fire still smoldering in California, Lisa Pelton and some of her neighbors in Mandeville Canyon received an unpleasant notice from their bank: Their home equity lines of credit were being slashed.
“I was appalled,” Pelton told Nexstar’s KTLA on Thursday. “I thought it was unconscionable what they did. They sent this letter out four days after the fire started to everyone in a certain ZIP code.”
City National Bank informed Pelton that it was abruptly cutting her HELOC, which allows homeowners to borrow against their available equity, by $50,000 even though her property was untouched by the 23,000-acre fire.
“I think whoever approved that letter should be fired,” she said.
The explanation City National Bank offered was that Pelton’s property, and others in the wildfire burn area, had “declined significantly” in value. Rather than cancel the line of credit outright, the bank said it would reduce her line of credit “until further assessments” could be made.
According to the Office of the Comptroller of the Currency, a bank can reduce the credit limit on a HELOC if it determines “consistent with regulatory standards, that there has been a ‘significant decline‘ in the value of the property securing your loan since the HELOC was approved.”
The government agency also said an account can be frozen for the same reason, adding that homeowners should review their account agreements and contact their bank with their concerns.
Pelton fought back. She said she called City National Bank and spoke to a representative who expressed some empathy about her situation. The bank eventually reversed its decision and fully restored her HELOC.
