Washington Post: Homeowners Losing Equity Lines
(Need a log-in to read it? Try BugMeNot.)
Ah, Credit Crunch, how do I love thee?
It is rather nice to see morons get their financial posteriors handed to them. In the case of the Post article above, our moron's surname is Corazzi.
The Corazzis apparently had recently opened and were enjoying the sweet fruits of a $95k home equity line of credit (HELOC) from USAA Federal Savings Bank. Alas, prolonged use of the Corazzi Home ATM 'twas not to be.
Roughly five months into the deal, the bank called to tell Ms. Corazzi that they were yanking the HELOC, and pronto. Homes in her county (they said) had skidded in value. No way was the bank going to be left holding this bag.
Fantastic. Wouldn't want to have to rely on something as bland and passé as CASH SAVINGS, would we?
Anyone care to guess whether or not such savings are completely missing from the Corazzi household? (By the way, you can see purported pics of the Corazzi abode at the Housing Bubble Hall of Shame. Note the spruced-up kitchen.)
Banks Pull in the Reins; Corazzis Gag
Why would USAA do something so unAmerican as this, you ask?
Well, it MIGHT have something to do with the fact that second-mortgage holders have a darn tough time NOT losing their proverbial shirts when homeowners saddle up on the foreclosure trail. In such cases, once property values give way, these HEL and HELOC originators are in prime position to recoup a big fat sum of zero when all is said and done.
Hmmm. Sounds like a good idea to me.
Overextended? Who? Us?
It was. In December, her salaried position as a loan-processing manager at a local mortgage bank changed to a commission-only job.
Given the slowdown in the industry, Corazzi has collected only one paycheck since then. Her husband, Ron, sells large-format copiers and printers to builders, and his salary alone cannot support them and their four children, ages 4 to 8.
Let's see: Her job? Tied to the mortgage industry. His job? Tied to the building industry.
Now add "real-estate bubble" and "pop" and "credit tightening" to the mix. See where this is going?
That's right: What a GREAT time for banks to be extending HELOCs! And what a fabulous time for families with ZERO CASH SAVINGS to use said HELOCs and take on mid-five-digit debts just to make ends meet!
Well, that's some good news. At least they were able to tack on $50k of "secured" debt before USAA turned off the spigot.
Holy heck — who did that appraisal? And can they come take a look at my place, too? My net worth could use the padding (on paper, of course).
The Comments Are Fun
Oh, and don't miss the fun and excitement happening in the hundreds of comments left at the Post story, either.
Some choice morsels of my liking:
In short, they were living too close to the edge when the edge moved in on them.
And my personal favorite: