Monday, February 25, 2008

Credit Today, Gone Tomorrow

WaPo had a story over the weekend on folks who are not so happy to see banks renege on home equity lines of credit.

In one brief phone call, Nancy Corazzi's lender yanked away what was left of the $95,000 home equity line of credit that she and her husband took out five months ago.

The lender informed her that her Howard County home had plummeted in value and the company did not want the risk that she would owe more than the house was worth.

"I got off the phone and I was shaking," said Corazzi, who was using the money to pay preschool tuition for her twins ."I was near tears. We needed this credit line to get us through some tough times."

We can debate the wisdom of holding onto a line of credit that puts a home at risk. But this is just another example of the fallout we're seeing from the turmoil in the credit markets. Today, WaPo reports that local governments are coming up with a hole in their budget because the Fed's recent cuts in interest rates, intended to stimulate the economy, have sharply reduced the income localities receive from investments. Meanwhile, the Examiner reports that Howard County officials are considering whether to set up a trust fund to tackle the looming burden of funding future retiree benefits.

Establishing a trust fund would provide officials more flexibility to invest the money and ensure it couldn’t be spent when budget times are tight.

Later, the paper quotes Christopher Summers, president of the conservative Maryland Public Policy Institute, who says jurisdictions should consider cutting or renegotiating the benefit programs rather than just putting more money aside.

1 comment:

Anonymous said...

So a loan processing manager at a local bank lost part of her income and does not understand the terms of her own home equity loan. Did she loose her job because of the downturn in the market or because she clearly was not great at her job seeing as how she did not understand the terms of her own loan.

She may want to look into selling some of her copper cookware or stainless appliances before seeking another loan to continue helping her live beyond her means.

These articles make me very upset with myself; I really wish I would have had the courage to live well beyond my means and rack up crazy debts – eventually the government would have bailed me out. The folks taking advantage of the situation will end up capitalizing while the folks that play by the rules will end up footing the bill.

Choose Anarchy
In Howard County