Home Equity Lines of Credit = More Foreclosures?
by Tom on June 15, 2009
in Market Musings, house prices
Calculated Risk has a good write up about a couple of studies and articles that were written about home equity lines. Let me hit a couple of main points, then go read the entire article:
- One of the main indicators in terms of pending foreclosures is what’s referred to as “cash out refinancing.” The people who take out an equity loan against their house and borrow against the appreciation that happened are much more likely to face default and foreclosure.
- The other main indicator is buying with no or virtually no money down in a “bubble” year.
So what? So, when you expand the view and say that it’s not just the “bubble year” purchases that are at risk of foreclosures, that increases the likelihood that we’ll face more foreclosures than forecast.
Tom Vanderwell
Calculated Risk: Study: Home Equity Borrowers in Danger
