Owners again borrowing against homes as housing market recoversAfter a home equity credit binge during the housing bubble, banks restricted the loans as home prices crashed. But now second mortgages are back in vogue.
By E. Scott Reckard and Andrew KhouriFebruary 20, 2014, 5:00 a.m.
Retired aerospace engineer Owen Klasen was rejected last year when he sought a second mortgage to paint and re-roof his house.
Home prices hadn't risen enough, the loan officer told him.
But last month, the same loan officer offered him more than double the credit he needed.
"I told him I needed $25,000" on a home equity line of credit, said Klasen, who lives in Fillmore in Ventura County. "He said we were qualified to go up to $60,000."
Klasen is among a wave of homeowners in California and nationally who are again putting their homes in hock — despite the costly lessons of the housing meltdown.
After a home equity credit binge during the housing bubble, banks shut off the tap as home prices plummeted. Sobered homeowners stopped viewing equity as free money for cars, vacations and college educations.
But now second mortgages are back in vogue. Homeowners in the six-county Southern California region took out 47,542 home equity lines of credit last year — 48% more than in 2012, according to research firm DataQuick. The median credit line was $100,000.
The same trend is taking hold nationwide. Bank of America, for instance, saw its home equity business surge 75% last year compared with 2012, said Matthew Potere, who oversees home equity lending for the Charlotte, N.C., giant. In the fourth quarter, BofA issued $1.9 billion in new home equity credit lines, up from $1 billion a year earlier.
In Southern California, the heaviest borrowing is in the wealthiest neighborhoods, where prices are closer to their peaks during the bubble, DataQuick figures show. Orange County's Villa Park, with a median home price topping $1 million, had the highest rate of equity credit approvals last year.
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