A house qualifying for the homestead exemption must be on less than one acre of land in cities and on more than one acre in rural areas. So a home on more than one acre of urban land or on less than one acre in a rural setting might not be eligible for a home equity loan. This includes the group that is not in an urban, purely neighborhood tract, but not in a farm setting either. Also, lenders must go through the courts to foreclose and sell a property put up as collateral for a delinquent loan. They have no other recourse, such as personal borrower or third-party liability.
Lenders say getting judges' permission to foreclose can take months.
But a member of the Supreme Court task force that recommended the rules said since most foreclosures are uncontested, the delay is reduced to weeks. Some lenders have all but abandoned home equity loans because they can make more money refinancing mortgages or selling new ones. Others blame the delay in home equity deals on loan requirements that they say are highly restrictive or ambiguous. And that's only if prospective borrowers can even find a lender able to close. And demand for home equity loans is still high because borrowers can benefit through lower interest loans and increased tax deductions.