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Consumers Lower Expectations on HELOCs

Customers are more satisfied with the process of getting a home-equity loan or line of credit than they were last year, but only because their expectations are much lower, according to a new survey.

A J.D. Power and Associates poll of 3,176 customers earlier this year found that overall customer satisfaction has risen to 780 on a 1,000-point scale, up 14 points from a year earlier. That's despite the fact that measures of service -- like length of approval process -- have remained consistent.

Customers simply expect more problems when they apply for such debt, due to ongoing troubles in the housing and mortgage markets, says Tim Ryan, senior research director of the finance and insurance practice at J.D. Power. At this point, many are just happy to obtain the loan, regardless of how long it takes or the frustrations they have to endure.

That's especially true since some homeowners already have "feelings of uncertainty toward property values and lenders," as Ryan puts it, or "associate the loan application process with hassle and frustration."

Ryan suggests customers contact several lenders to get the most competitive interest rate and fee structure. Those who need to consolidate several existing loans may be able to work with their current lender to negotiate a favorable rate.

"Now may be an opportune time for homeowners who qualify to apply for a home equity product," says Ryan. However, homeowners with weaker credit or who are in areas where property values have declined sharply will probably have a "more difficult time qualifying for a home-equity product under the current circumstances."

This site offers a tool to search for the best rates on home-equity loans in your area. Rates have generally risen over the past week, especially in the Northeast. Local banks and credit unions can offer more competitive rates than major lenders.

Before signing loan documents, homeowners should "completely understand" terms of the loan, Ryan adds. If something is unclear, you can always ask for an explanation, renegotiate, or simply walk away from the deal.

Bank of America ranked highest in the customer survey, followed by SunTrust and Wachovia.

Customers were especially satisfied with Bank of America's application and approval process, SunTrust's representatives and Wachovia's ability to close the deal.

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