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I just received a letter from my bank advising me that they have frozen or reduced the amount of my home equity line of credit (HELOC). The letter explained that the action was taken because the value of my home had declined. Is that legal?

Yes, under specific circumstances.

Federal law permits the bank to reduce the credit limit on your HELOC in certain circumstances. If the bank 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, they may lower your credit limit.

Banks could also freeze your account and stop additional extensions of credit if there has been a "significant decline" in the property value since the HELOC was approved.

Review your account agreement for policies specific to your bank and your account. You should also contact your bank immediately to discuss any outstanding checks written on the account.

Last Reviewed: April 2021

Please note: The terms "bank" and "banks" used in these answers generally refer to national banks, federal savings associations, and federal branches or agencies of foreign banking organizations that are regulated by the Office of the Comptroller of the Currency (OCC). Find out if the OCC regulates your bank. Information provided on should not be construed as legal advice or a legal opinion of the OCC.

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