Lenders rethink home equity loans

The Wall Street Journal has an article today about lenders pulling back home equity lines, and problems with home equity lines, second loans and foreclosure.

As home values continue to sink, mortgage companies are increasingly walking away from delinquent home-equity loans rather than pushing borrowers into foreclosure. At the same time, some lenders, in an effort to protect against future losses, are looking at scaling back home-equity lines of credit held by certain borrowers who are still making payments.

We’ve been discussing this for several months. The problem is that the second mortgage holder can, in the words of the article, be bought up by “third parties” who can then collect from you.

That means if you have two loans and a foreclosure, then the second mortgage lender can come after you later for the loan — without foreclosing at all.

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