There has been a lot of finger pointing lately. Home equity borrowers are defaulting, lines are being frozen, and over 70% of lenders are reporting tougher standards for new HELOC borrowers.

Who’s to blame?

According to the Washington Times, it depends on who you ask:

“Why the sudden stiffening of HELOCs? It’s the economy, banks say.

“Banks are in the business of lending, says James Chessen, chief economist for the American Bankers Association. “They have to weigh the likelihood that they are going to be repaid. The weaker the economy, the greater the risk.”

Meanwhile, some economists point to consumers.

“Basically, we spent much of the last decade with consumers aggressively using HELOCs with rapid balance growth,” says Scott Hoyt, an economist with Moody’s Economy.com.”

At this point, finger pointing doesn’t do much good. However, it is important to understand how the HELOC crisis came to be so that we can avoid defaults and unexpected freeze letters to borrowers in the future.

See Also:

Why Are Qualified Home Equity Loan Borrowers Suffering?

How the Home Equity Line Freeze Can Damage Your Credit Score

Tags | Heloc, heloc crisis, heloc freeze, home equity line of credit, mortgage crisis