Shirlee Zerkel: Be Watchful of Home Equity Loans!

May 27, 2006

While this is not STRS-related, there's some very valuable information and words of warning here for anyone thinking of getting (or already has) a home equity loan -- from someone who knows! Thanks to Shirlee Zerkel for sharing this with us. KBB

This is a word of advice for those who have home equity loans or are thinking of taking one out.

Basically they are good, but some banks do not provide the security that the borrower needs. If you have taken a home equity loan out and used only part of the money, the rest sits there waiting for you to use it -- or for someone else to steal it.

Did you know that if someone breaks in and steals your banking information or intercepts your mail that may have the account numbers on it, they can walk into some banks in the grand state of Ohio or in a neighboring state where a bank branch may be and take out all of your accounts and also the remaining loan money in your equity account?

The bank would do nothing to help you if the loan money was taken, for they know that they are going to charge the whole loan against you because you are already making payments on the money you have accessed from the loan account, and if you don't pay, your credit will be ruined.

If you suspect someone stole your records, you can close most accounts and then open a new account with a new number in such areas as checking, and savings. But you can't close out and reopen an equity loan. You would have to refinance that loan, but banks don't always explain that fact. Please ask about that!

To prevent this horrible thing from happening to you, go to you loan provider and put a block on your equity account. (Even that doesn't always work; tellers aren't always careful.) You could also put restrictions on withdrawals from the loan account.

Since this terrible thing has happened to a member of my family, I am now much more careful. No money can be taken from any of my and my husband's accounts without a picture ID being shown. Please put on the restriction that you and only you can withdraw money from the loan account no matter what type of proof the thief may try to use.

In our family's case the thief used a false POA and the bank allowed the man to take the money even though the bank already had a POA on file for that account. The bank is claiming that they did nothing wrong!

You can't be careful enough with your accounts.

Shirlee Zerkel

Note added 5/29/06: Those loans in which money sits waiting for you to use can also be called flex loans or lines of credit. Different banks refer to them by different names so be careful. SZ