If you have a home equity line of credit -- what the industry calls a "HELOC" -- you probably think of it as a financial safety net, quick cash you can access in times of emergency or when you face a big expense that can't otherwise be paid all at once.

Unfortunately, HELOCs have been drying up across the country as lenders have put the brakes on withdrawals and reduced credit limits. The result is that access to home equity lines of credit is being denied to many homeowners, including some who need cash to stave off foreclosure.

Lenders argue that they have the right to limit HELOC withdrawals because declining home values have made such loans more risky. And while lenders have a point, the Federal Deposit Insurance Corporation has warned national lenders that they cannot cut-off HELOC access without following federal rules.

So what do the rules say?

First, the lender must show that there has been a "significant decline" in the value of the property, an expression which means that equity has fallen by 50 percent. "Equity," of course, is not the same as overall value because you can reduce equity if home prices fall or if mortgage balances increase.

Second, lenders can limit HELOC access if the borrower is not making full and timely payments.

Third, if lenders do limit HELOC access they must give borrowers "the opportunity to seek a review of the institution's decision to reduce or suspend a credit line based on a significant decline in a property's value."

What does it mean? If you get a letter from your lender which cuts off access to your line of credit, explain why the value may not have fallen as much as the lender believes. Ask the lender to review your situation and if the value has been reduced because of an automated computer model ask for a valuation of the property by a local appraiser.

For more articles by Peter G. Miller, please press here.

Published: July 9, 2008

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .