Busted: Bankers and The Global Economy

February 7, 2008

Home Equity Lines Dry Up

Filed under: banking, credit, money — Tags: , , , , , , , , — digitaleconomy @ 12:02 am

Banking your life on the morality and goodwill of bankers is a dangerous way to live. Yet, many people have become entirely dependent on the main asset that they hold: their home. With the creative lending in existence, it’s a wonder that that people can’t see that they are at the mercy of the bankers goodwill and profiteering in order to survive or bolster their lifestyles. Ranging from reverse-mortgages for the retired to regular home equity loans, the bankers offer to bankroll for any purpose that holds your house as collateral. The problem with this kind of thinking is that bankers are not thinking of the asset itself, only the perceived value. Even in a stable housing market, in the event of a default or major catastrophe, the bank is always left holding the bag. Admittedly, banks hate to hold real estate. Banks will often liquidate at fire sale prices to get real estate off of their books since real estate does not generate interest.

With the Countrywide mortgage debacle and the subprime mortgage bubble bust, banks find themselves in a world of hurt. Wells Fargo, Washington Mutual and JPMorgan Chase released statements Friday saying they have also started halting equity lines because of tumbling home values. Recent declines in property values have stripped many local homeowners of personal safety nets as lenders freeze lines of credit. Even borrowers that are current on payments are being cut off because of declining values.

The reality is that bankers don’t really want your home, real estate or your affection. They want your interest, a stake in your assets and security for your debt.

FDIC Speech on Loan Modifications


1 Comment

  1. Interesting article. Thanks for the post.

    Comment by Mortgage Maniac — February 8, 2008 @ 9:55 am

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