Video: Banks pull back on lines of credit

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ORTING, Wash. - With foreclosures up across the country, banks are spooked about losses.

The KING 5 Investigators have learned about a new way they're tightening the purse strings. It could affect thousands of local homeowners, and at least one consumer – Lake Tapps resident Grant Pritchard – is crying foul.

Pritchard owns two Anytime Fitness gyms - one in Orting and another in Buckley.

"Love it, we like to stay fit ourselves and to interact with other people," Pritchard said.

Now he's obligated to open a third gym, which he's hoping to build in Auburn.

KING

Grant Pritchard of Lake Tapps, Wash. says his business plan to open a third fitness gym fell apart.

"If I don't do it, there's a rather large penalty involved that I have to pay to Anytime Fitness," Pritchard said.

The business plan to open the third gym includes taking a home equity line of credit on his house on Lake Tapps in Pierce County. Last spring Washington Mutual encouraged the business and sent a letter saying he'd been approved for a $230,000 line of credit.

It was enough for the gym.

But just eight months later, in February, Pritchard's business plan fell apart. He received a letter from WaMu saying the amount he could borrow had been cut from $230,000 to $80,000.

Why?

WaMu decided his home value plummeted from $1,160,000 last May to $785,000 in February - a 33 percent drop in nine months.

"None of it made sense to me, I didn't understand it - I was blown away," Pritchard said.

Pritchard's mortgage broker, Kevin Eliason, owner of Lakeside Mortgage in Bonney Lake, says it's an overreaction by a bank nervous about current conditions.

"What the banking institution is doing it would appear in this case is they're using that blanket of fear that has come across as a storm to protect their equity losses," Eliason said.

WaMu tells KING 5 the action is "part of being a responsible lender. Given the current housing market WaMu has increased efforts to reduce select credit lines as a result of declining home values."

But the drastic change in value on this home is not in line with research done by the KING 5 Investigators.

Pierce County tax records show the home's assessed value actually went up this year.

KING

Pritchard's home value plummeted from $1,160,000 last May to $785,000 in February - a 33 percent drop in nine months.

And according to the Northwest Multiple Listing Service the median home price in that area did fall during this time period - by 6 percent, nowhere near 33 percent.

Pritchard's left scrambling to find the money somewhere else.

"It's not just a line of credit that I want," he said. "It's a line of credit I deserve and I need."

WaMu isn't alone. Other banks including Countrywide, Chase, and USAA Federal Savings are taking this unusually aggressive move as they grapple with the fallout of the mortgage crisis.

Washington Mutual says you can fight their findings, but the consumer has to pay for another appraisal to dispute it.