Federal Suit Says Wells Fargo Illegally Cut Illinois Homeowner's HELOC; Class Action Status Sought

In Chicago, Illinois, Reuters reports:

• An Illinois homeowner accused Wells Fargo & Co, the largest U.S. mortgage lender, in a lawsuit of summarily cutting home equity lines of credit by undervaluing customers' houses. In a federal lawsuit filed in Chicago on Wednesday that seeks class-action status, homeowner Michael Hickman accused the bank of using "dubious" computer models that systematically undervalue homes, depriving customers of credit.

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• In his complaint, Hickman said that because the new limit was just above what he had borrowed, his "credit utilization rate" increased, damaging his credit rating and boosting his borrowing costs. The lawsuit says that San Francisco-based Wells Fargo violated the U.S. Truth-in-Lending Act and Illinois consumer fraud laws. It seeks punitive damages and several other remedies.

For more, see Homeowner sues Wells Fargo over equity credit lines.

Go here for a six-page letter of guidance issued by the U.S. Office of Thrift Supervision which generally explains what obligations lenders have in connection with the freezing of home-equity lines of credit.

In a related story, see Sarasota Herald Tribune: Some home-equity lines of credit can't be rescinded. Frozen HELOC