And if it does find an external problem, it may not react as harshly as it would if the problem were in-house. We do have technology that enables us to review accounts on a more frequent basis depending on what's happening with their payment or credit history. There are some other things to watch out for with equity lines. Federal regulations technically permit a creditor to reduce a borrower's credit limit if her collateral home drops significantly in value. But lenders say they won't do so in most cases .
Lenders can then demand repayment of the entire outstanding balance.
Because of this, customers should be careful to accurately represent their income, assets and other information when getting lines of credit. Still, people who default on equity lines have more leeway than people who default on first mortgages even in a worst-case scenario, experts say. That's because the first lien holder gets first dibs on a borrower's home in a foreclosure proceeding, and an equity lender has to fight for the scraps. Often, the cost of doing so is greater than the payoff. The Chicago company is a subsidiary of ABN AMRO Bank NV of the Netherlands.