Freezing Home Equity

By Jonathan Higuera
April 14, 2008 04:06 PM

The plethora of news revolving around the housing market continues to reverberate in unforeseen areas.

The latest has to do with the revelation that banks are freezing home equity lines of credit en masse, cutting into one avenue for consumer spending.

Gretchen Morgenson, a business columnist with The New York Times, points out that in the past month major lenders such as Washington Mutual, IndyMac Bank and Greenpoint Mortgage Unit of Capital One have sent out hundreds of thousand of letters to consumers informing them of the freeze.

In addition to lower consumer spending, the freeze could lower credit scores for some of the affected borrowers.

The lenders say the moves are related to falling home prices, which reduce the value of the home’s equity.

For business journalists covering real estate, the home equity story is but one of many to follow. Binyamin Appelbaum, a staff writer at The Boston Globe, is more concerned with corporate misbehavior.

He’s following concentrations of foreclosures and housing inventory levels.

“When you see a cluster of foreclosures it’s usually worth following,” he said. “It represents more than one family’s pain.”

A couple of months ago, the Globe did a story on how it was becoming more difficult to secure a car loan.

“We’re trying to find ways to convey to readers how serious it is,” he said. “Everything bad that we said happened last year has doubled.”

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism