Countrywide: Existing Home Equity Lines Slashed on Emerald Coast

Countrywide has been sending letters to their existing home equity line borrowers in my market in the Destin area on the Emerald Coast of Florida.  They are decreasing home equity line values.  The letters read:

“Countywide Home Loans is reviewing and analyzing home equity lines of credit in its servicing portfolio.  As you know, home values in many areas of the country have declined. We believe that the decline in the value of your property, from the original appraised value at the time your loan was made, is significant.  In accordance with the terms of your Home Equity Credit Line Agreement… we have elected to suspend further draws against your account.”

The letters go on to say that Countrywide will try to work with the borrower if they were in the middle of a major expense (home improvement, college tuition).  They also say that the new Automated Valuation Method that came up with the value may be contested if the homeowner believes the value is incorrect.  I wonder how many homeowners will go after Countrywide for the closing costs associated with their home equity line, since they will no longer be able to use it.  There were volumes of lines taken out by property owners in anticipation of limited mortgage resources.