Home Equity Loans

Federal authorities this week announced a series of arrests and convictions in connection with a global identity theft ring that stole millions of dollars by hijacking home-equity lines of credit issued to thousands of consumers. On Monday, state and federal law enforcement officials arrested four men who were part of a group that allegedly combined high-tech equipment with old-fashioned con artistry to drain home-equity lines.

Slow job growth and declining home prices are causing financial problems for more Americans, who are falling behind on consumer debt, including home equity loans, at the highest rate since 2001, the American Bankers Assn. said Tuesday. Credit counselors said consumers were paying the price for reckless attitudes about debt fostered by years of easy credit, particularly in the mortgage market.

Dr. David Westerberg had the chance to buy into a cosmetic dentistry practice in Palm Desert but found that the credit crunch had chipped away his ability to find money through conventional small-business loans or by tapping his home equity. Although his house value had gone up, the appraiser was having a tough time finding comparable houses that also had become more valuable. "The market has changed," said Westerberg, who already burnishes smiles at a San Bernardino practice.

Late payments on credit card bills slipped in the second quarter while delinquencies on home equity lines of credit climbed to a 5 1/2 -year high, painting a mixed picture of how people are managing their debt. The American Bankers Assn., in its quarterly survey of consumer loans, reported Wednesday that late payments on credit card bills dropped to 4.39% in the April-to-June quarter. That was down from 4.41% in the first quarter and was the lowest reading since the final quarter of 2005.

Wells Fargo & Co., the second-largest U.S. mortgage lender, said Tuesday that it would take a $1.4-billion fourth-quarter charge largely related to losses on home equity loans as the nation's housing market deteriorates. The company, the fifth-largest U.S. bank, said it also was significantly scaling back making home equity loans through brokers, citing a need to tighten standards and reduced demand from investors seeking to buy the loans.

Ameriquest Mortgage Co.'s decision to close all 229 of its retail branches and eliminate 3,800 jobs follows a steep decline in its lending volume and attempts to find a buyer, according to analysts who follow the home-loan business. The Orange-based lender said Friday that it was not for sale. But it has been squeezed hard by rising interest rates and bitter competition. Ameriquest officials said loan volume plunged 46% to $2.6 billion in the first quarter from $4.8 billion a year earlier.

WE'VE got enough money worries at home. Then we leave the house, and the show begins. The acting. The cover-ups. The secret sizing-up of others. How are they doing so well? We can't figure it out because almost nobody talks honestly about money. To make sure we're keeping up, though, we gather clues, make assumptions, try to piece it together. That's where we go wrong. What we're really doing is living a big financial fiction.

Question: My 18-year-old son has been at a private high school that is also a residential treatment facility in Texas for the last year. I financed his tuition and treatment with a $62,000 loan. The variable interest rate is tied to an index that just jumped to 8.48% in April. This is not a federal loan. I am making payments monthly. My question: Should I refinance this loan with an 8.5% fixed-rate personal loan or stay with the variable rate?

Traditional 30-year mortgages these days are unusually affordable by historical standards, but if you're looking for a home equity line of credit, don't expect any deals. The market for such credit lines, which practically shut down as home prices tumbled, remains tight as a drum despite signs of life in the rest of the home loan market. And offers that let you pay only the prime rate or just above that benchmark are long gone. "The days of lenders falling all over themselves to help you empty the equity out of your home aren't coming back any time soon," said Keith Gumbinger, vice president at loan data tracker HSH Associates.