What have we learned from the Great Recession and its underpinnings?
People who bought their homes at the low end of the housing crash are pulling equity out of their homes as a quick source of cash again, the Boston Globe reports today.
During the housing boom of a decade ago, many homeowners cashed out equity almost as fast as values rose, using their homes, as economists put it, like ATMs. When values began to fall, they were left with more debt than their homes were worth, contributing to the foreclosure crisis, the overall financial crisis, and ultimately the nation’s worst recession in 70 years.
Few bankers and analysts expect the home equity market to return to those days of irresponsible borrowing and lending. Home equity borrowing in Massachusetts increased 7 percent in 2013 to just over 37,000 loans, but that was one-third of the more than 100,000 home equity loans made in 2007, according to the Warren Group, a Boston real estate tracking firm.
Lenders say they have learned their lessons.
In general, banks have tightened credit standards, limited loan amounts, and resumed doing thorough appraisals, sending appraisers to physically inspect properties, rather than relying on computer-generated estimates.
“It’s far more responsible,” said Lee Howlett, a vice president with Strategic Information Resources, a Springfield firm that does appraisal and title work for lenders.
Well, OK. One thing about bankers and people who make a living dispensing loans: It’s always a good time to get a loan.