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Home equity isn't what it used to be
Visa credit card in wallet
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TEXT OF STORY
Renita Jablonski: Multinational banks aren't the only ones having trouble getting money. As banks stop lending to each other, they've stopped lending to customers. Marketplace's Stacey Vanek-Smith reports.
Stacey Vanek-Smith: A couple weeks ago, Jessica Eustice got a letter from her bank:
Jessica Eustice: The notice said under current business conditions, we have to freeze your equity line.
That experience is becoming quite common, says personal finance expert Jordan Goodman.
Jordan Goodman: Home equity lines are being cut back dramatically because the value of the homes are falling. That's part of the credit crunch kind of hitting main street.
And it's a big hit. Goodman says a lot of people have come to rely on home equity.
Goodman: People have been using home equity credit to meet their basic expenses.
Credit cards are seizing up as well. These days, it's harder to qualify for a card. Take Dan Ouellette. He lost his job and his house, and has had trouble getting money ever since.
Dan Ouellette: There's no way I could apply for a credit card. There's absolutely no way I could qualify for one.
Personal finance expert Goodman says financial institutions are making the situation worse by raising interest rates and minimum payments. And, he says, even if the markets get a bailout from Congress, it will likely be a long time before people can get easy access to credit again.
I'm Stacey Vanek-Smith for Marketplace.
Mr. Hilty is correct. This story is simply not news, it is just a sign that the banking industry is returning to "normal" lending standards. I for one feel good that someone who is unemployed and homeless cannot get credit. Credit is something given to a consumer who can resonably be expected to pay it back within terms. A much more cogent story would have been an interview with someone with a good job and excellent credit who is having difficulty getting a home loan, THAT is what makes a credit crisis, not a story of someone with poor credit/no income who cannot get a credit card.
I was disappointed that Marketplace chose to run this piece given how obvious this should be to its listeners. Is this a surprise to anyone that banks are tightening their lending standards to something that approaches sanity given the turmoil caused by their past recklessness? Are we to be shocked that an unemployed citizen might have difficulty acquiring a credit card today or that home equity lines of credit are being frozen when their underlying assets are declining in value? Marketplace's constant coverage of the obvious effects of the housing bubble takes away air time that could be devoted to broadening the discussion of how to get out of this mess including the viewpoints of contrarian economists. Come on Marketplace, you can do better than this.
