Banks just can't wait to lend money to some borrowers

Banks just can't wait to lend money to some borrowers
Good credit, job and stability help
November 11, 2007

BY SUSAN TOMPOR

FREE PRESS PERSONAL FINANCE WRITER

Just because it's harder to tap into home equity doesn't mean that no one can get any money.

In September, amid talk of the credit crunch, Derek Palm, a West Bloomfield homeowner, walked into a National City Bank branch to take care of some business with his son's account at college, got a pitch from a banker and pretty much walked out with a $50,000 home-equity line of credit.


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He's the kind of customer banks are begging to find these days. He's not likely to go blow all that money.
It's essential to remember Palm's experience and realize that all home equity isn't lost, either. After all, consumers nationwide have roughly $21 trillion in household real estate wealth.

"It's not like there's a credit crunch across the entire spectrum of the economy," said Mark Zandi, chief economist for Moody's Economy.com.

Some homeowners -- those who bought their homes years ago, those who continued to pay down debt, those who didn't borrow to the hilt -- are doing OK. So they will be able to continue to buy and borrow.

"They're the reason why" the U.S. economy "is likely to continue to grow," Zandi said.

It also may help that the Federal Reserve has cut interest rates twice since Sept. 18.

Right now, banks still want to lend money to top borrowers and continue to offer home-equity loans and lines of credit.

Auburn Hills-based USA Credit Union has a promotion going through Nov. 30 on a 7-year, fixed-rate home-equity loan for as low as 6.25%. The credit union is offering homeowners the chance to borrow up to 90% of their home's current value, less the outstanding mortgage balance. The minimum loan balance is $5,000.

Huntington Bank has a promotion on a home-equity personal credit line, too. This fall, National City Bank offered a promotion -- no longer available -- for a home-equity line of credit as low as 6.75%. The rate was based on the prime rate minus one percentage point. The minimum credit line was $50,000. It also required that the customer withdraw $25,000 at closing.

"There's a huge demand for good borrowers right now," said Diane Swonk, chief economist for Mesirow Financial in Chicago.

She dubs it a bit of a "feeding frenzy."

No one has to tell that to Palm.

"They made it very easy," said Palm, who has good credit, has a good job as a medical sales representative and has lived in his home for 14 years.

He estimates that his house would sell for about $550,000. He sees the equity line as a backup. He said he doesn't have plans to buy anything new; maybe he'll use some money toward a child's college tuition.

Even so, many Michigan homeowners won't find it that simple to borrow as much as they once could.