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Home-Equity Loans Latest to Bite Banks

Even lenders that dodged subprime chaos suffering big trickle-down losses

By Jim O'Neill,  Newser User

Posted Mar 12, 2008 12:03 PM CDT
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(Newser) – Home-equity loan defaults are soaring, the Wall Street Journal reports, as the trickle-down effect of the subprime mortgage crisis makes its way into what was once a source of big profits for lenders. JP Morgan Chase and Wells Fargo both escaped major writedowns on subprime mortgages gone bad, but already are feeling the pain from home-equity losses.

Analysts say problems will continue through 2008, prompting banks to tighten credit further. JP Morgan said it expects home-equity-related losses to increase by 81% from the fourth quarter of 2007 to the first quarter of '08, to $450 million, adding that losses could double by year’s end. Washington Mutual, National City, and SunTrust are among other lenders facing home-equity woes.

A foreclosure sign is seen atop a sale sign for a house in Stockton, Calif., Saturday, Dec. 1, 2007. Home foreclosures soared to an all-time high in the final quarter of last year and are likely to keep on rising, underscoring the suffering of distressed homeowners and the growing danger...
A foreclosure sign is seen atop a sale sign for a house in Stockton, Calif., Saturday, Dec. 1, 2007. Home foreclosures soared to an all-time high in the final quarter of last year and are likely to keep...   (Associated Press)
Homes stack up on a hillside in San Francisco, Thursday, March 6, 2008. Americans percentage on equity in their home fell below 50 percent for the first time since 1945, and now banks are saying delinquencies are soaring on home-equity loans.
Homes stack up on a hillside in San Francisco, Thursday, March 6, 2008. Americans percentage on equity in their home fell below 50 percent for the first time since 1945, and now banks are saying delinquencies...   (Associated Press)
A yellow water shutoff notice is posted on a railing to this Minneapolis home Thursday, March 6, 2008. The house was sold in foreclosure earlier in the day. Home foreclosures soared to an all-time high in the final quarter of last year and are likely to keep on rising, underscoring...
A yellow water shutoff notice is posted on a railing to this Minneapolis home Thursday, March 6, 2008. The house was sold in foreclosure earlier in the day. Home foreclosures soared to an all-time high...   (Associated Press)
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Fitch warns that home-equity loans sinking fast
MarketWatch

Home-equity lenders less likely to allow refinances
Wall Street Journal

 
Bear Stearns • Wells Fargo • National City • Washington Mutual • SunTrust Banks • housing crisis • subprime crisis • home-equity loans • JPMorgan Chase

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