Readers Shine Light on Credit Crunch, Real Estate Woes

My inbox is overstuffed with comments and suggestions from readers. Here's an edited sample.

In response to last week's column about the availability of credit, Greg Schuckman of Lorton said banks are continuing to pull back on existing home-equity lines of credit. "I got a letter from Wachovia earlier this week letting me know that my $239,000 HELOC had been 'suspended' because of falling home values," Schuckman wrote. "Even though I have perfect credit and have about $250,000 in equity in my home, according to their calculations, falling home prices in my area have caused the value of my home to drop by about $150,000 from a high of $745,000 two-and-a-half years ago. I have applied for a new, $150,000 line of credit with a different lender, so we'll see how that goes."

A column about how foreclosures are hurting homeowners associations prompted mail about the process of getting required financial disclosure packets out to buyers.

Brian Reilly, who lives in New Jersey, wrote: "I owned an association management company for 10 years. There is no reason to charge $150 to produce an accurate recent financial statement or even a copy of the latest external financial review, which every association should have done annually. You print the report off your hard drive, put a cover letter on it and put it in the mail. A small charge is appropriate, $150 is way beyond reasonable."

Kevin McGrath, a real estate agent in Fredericksburg, wrote, "Professionally managed homeowners associations seem to want to hold on to these packets like they are some sort of state secret. Quite often the association wants a copy of the recorded foreclosure deed before they will release the packet. What are they concerned about? Do they think I have stumbled onto some secret black market where I can sell these for more than they are charging?

"Realtors often can't get the packet because they can't get a copy of the recorded deed 14 days before closing, which is the time frame that associations are allowed to put together and deliver the packet," McGrath said. "If they are really hurting for money, why do they make it so hard for me to give it to them?"

Katie Wethman, a real estate agent in McLean, pointed out a way to game the system. "It can be a strategic choice not to ask for the documents," she wrote. "Buyers retain a right of rescission up until, and for three to seven days after, the receipt of the documents. If the buyer is concerned about timing, financing, finding a better deal, or just getting cold feet, they may wish to delay receipt of those documents as long as possible. They may forgo them altogether in an attempt to keep their right to walk away right up until settlement."

An October column suggested that consumers opt out of catalogue mailings so they're less tempted to spend. It prompted several readers to complain about their experience with the Direct Marketing Association's service at http://www.dmachoice.org.

Mary Cleave of Annapolis was typical. "I sent in my $1 check to stop mailings in March and have seen no change based on this action," she wrote. "I have been successfully using the http://www.catalogchoice.org Web site to eliminate unwanted catalogs." (That's a free Web site run by the Ecology Center, a Berkeley, Calif., nonprofit group.)

I revisited the DMA Web site and confirmed that the $1 payment is required only if you make your request by mail; the Web service is free. But if you have bought something from a retailer recently, you'll have to call directly to get off their list. You're already their customer, and they won't give you up easily. Phone numbers are provided on the DMA Web site.

Several readers complained that policy changes by Fannie Mae and Freddie Mac are limiting investors' ability to buy more of the surplus housing inventory.

Richard Moroscak Jr., a vice president with OlympiaWest mortgage in Lansdowne, wrote: "I get a call once a day from borrowers who are interested in purchasing an investment property. They have 780 credit scores, full documentation, cash for a 30 percent down payment or more, great assets besides real estate, etc. In other words, they're the perfect borrower in most lenders' eyes. But if they own more than four properties they do not qualify to purchase another investment property. Investors tend to own multiple properties.

"If they take a short-term hard-money loan, which is insane, they generally cannot refinance out of them. The result is foreclosure unless they find another hard-money loan. Investors are on the prowl, but in my humble opinion, the market would stabilize much quicker if they actually had access to cash."

A column about the risks to consumers' deposits if someone they're doing business with files for bankruptcy drew hard-earned advice from one reader.

"This happened to me, and I should know better because I used to be a lawyer who did a lot of debtor-creditor and bankruptcy work," said Ellen Paul of Chevy Chase.

"I wrote to my state legislators to suggest legislation that would require companies that take advance payment or deposits to be bonded for an amount reflecting the amount of deposits or pre-payments they held over the previous year. That way, we unsecured creditors would actually get our money back."

E-mail Elizabeth Razzi at razzie@washpost.com.