Home-Equity Woes Tarry

Wall Street Journal (08/01/08) P. C12; Zuckerman, Gregory
Although recent improvement in home equity loans has been a rare positive sign for banks, bullish investors are cautioned against becoming too upbeat once again. They need to keep in mind that 2.22 percent of all home equity loans were charged off by banks in this year's second quarter--a record high. Analysts note that tax refunds and the Bush stimulus checks are at least partly responsible for why the climate for home equity loans is not overly dire. Goldman Sachs forecasts that home equity losses will not peak until at least early 2009, meaning that investors should avoid lenders with heavy exposure to home equity loans written by outside mortgage brokers and other third parties and stick with banks that made their own loans during the property boom.