Dear Liz: I had a home equity line of credit for about 15 years and was never late on a payment. I didn’t always carry a balance, but when I did, I paid more than the minimum required. My lender froze my account because I refused to sign an agreement to give access to my IRS records. What should I do?
Answer: If you want to tap your home equity, you’ll sign the agreement.
In the boom years, many banks abandoned prudent lending practices and didn’t bother to verify borrowers’ stated incomes. That has changed, and virtually every new mortgage these days requires borrowers to give lenders access to their recent tax returns as filed with the IRS.
So you can close this account if you want, but a new lender is going to want to see the same records.
You may feel your current lender’s demand is invasive, since you’ve handled the line of credit responsibly in the past. But high default and foreclosure rates have lenders spooked. Yours has obviously decided to verify that you are the low-risk customer that you seem to be, so if you want access to the line of credit, you have to play ball.