Smackdown: Mortgage Lesson 102

You have heard me rant and rave about my industry: mortgage.

And I think I have even told you how I made sure we were good with the mortgage on our house and we got a HELOC (home equity line of credit) in order to supplement and grow our business. Well I received notification from Chase (our lender) yesterday that they have shut down our HELOC due to making sure "homeowners are not borrowing more than their home is worth."

Now I agree with that principle - but what I don't agree with is how they came to determine that I am upside down and borrowing more than my home is worth. Well they used funny math. You know....the kind only used by financial institutions that the rest of us say - well that does not make sense. So here is what happened. They deemed that I was $30K in the hole already due to my current LTV (Loan to Value which is 80% of the home value)for both my first and second mortgage and therefore shut me down. But here is the kicker. Based on their automated valuation - I actually am $42 THOUSAND in the CLEAR!!!

1. What I mean by that is, if you take the amount of my first mortgage, add the LOC to that for a total.
2. Then take that total and subtract it against the value of the home - that means I have $42K in EQUITY before anyone needs to start panicking!!!!

And yet I am $30K in the hole according to their math. So how they arrived at their math was this:

1. They took the value of my home, multiplied it by 80% to equal my LTV. Then they said - well you are already in the red.
2. Then they took my LOC and added that to my 80% - making me more in the red.

I hate them. I hate them all. This basically has temporarily shut down my CSS business until we can figure out what our next move is. I can not tell you how pissed off I am at all this.

So lesson to you - know how they do the funny math. And you wonder why I hate this industry so much.