Wells Fargo has temporarily stopped accepting applications for home equity lines of credit (HELOC) due to the uncertainties related to the on-going Covid-19 pandemic.
The American lender believes that loan products like non-conforming mortgages, cash-out refinance loans, and HELOCs above $250,000 are risky for banks during the current economic downturn.
Effective immediately, the bank has decided to stop taking new applications for HELOCs and raised its minimum credit score for existing home equity loans from 680 to 720.
In an email statement, Wells Fargo spokesman Tom Goyda said: “Wells Fargo Home Lending will temporarily stop accepting applications for all new home equity lines of credit after 30 April 2020.
“The choice reflects careful consideration of current market conditions and the uncertainty around the timing and scope of the anticipated economic recovery.
“The HELOC suspension will continue until our analysis of market conditions indicates that it is appropriate to resume the responsible extension of HELOCs to homeowners.”
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The move is expected to affect the customers who were hoping to borrow money using the equity they have in their home as collateral.
The money could be used as a rainy day fund for customers whose income or business has been disrupted due to the Covid-19 lockdown.
Earlier this month, JPMorgan Chase also decided to retreat from accepting HELOCs and tightened its mortgage borrowing standards.