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The bank froze my home equity line of credit (HELOC) because it claimed that there was a significant decline in value. I agree that the value of my home has declined, but I do not think that it was a significant decline. Does the law define what constitutes a significant decline?

Under federal law, what constitutes a significant decline will vary according to individual circumstances. Generally, if the value of the home declines so that the initial difference between the credit limit and the available equity when the HELOC was approved is reduced by 50 percent, the decline is "significant."

Here is an example:

  • Assume the home has an appraised value when the loan was approved of $100,000.
  • The first mortgage on the property is $50,000.
  • The HELOC on the property is $30,000.
  • The total of the mortgage and the HELOC when the loan was approved is $80,000.
  • The difference between the appraised value and both loans when the HELOC was approved is $20,000 ($100,000 - $80,000).
  • That would place 50 percent of the difference at $10,000.

In this example, a decline of $10,000 in the appraised value of the property from $100,000 to $90,000 could be considered significant because it is 50 percent of the difference between the appraised value and the loan total, so the bank could prohibit further advances or reduce the credit limit.

Your bank may need to evaluate smaller declines in the property value on the basis of the specific circumstances to determine whether the decline is "significant."

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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