Many of those who used HELOCs to finance small businesses are upside-down or have taken extreme measures to stay solvent. The president of the California Assn. of Mortgage Brokers, for instance, sold his house and moved to a smaller place to stay afloat. Here's the Times story.
--Peter Y. Hong
Surveys released today showed that fewer Americans applied for mortgages last week and more were missing payments on their home equity lines of credit.
The Mortgage Bankers Assn. said applications for new home loans fell 8.2% for the week ending last Friday, with a slight increase in interest rates for 30-year fixed mortgages reining in the breakneck refinance market. The refinance share of mortgage activity dropped from 82.9% to 79.8% of total applications, according to the MBA report this morning.
From the report: 
The average contract interest rate for 30-year fixed-rate mortgages increased to 5.07% from 5.03% percent, with points decreasing to 1.16 from 1.24 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 4.67% from 4.79% percent, with points decreasing to 1.16 from 1.26 (including the origination fee) for 80% LTV loans.
The average contract interest rate for one-year ARMs decreased to 5.90% from 6.15%, with points decreasing to 0.31 from 0.44 (including the origination fee) for 80% LTV loans.
Also this morning, the American Bankers Assn. said record numbers of borrowers had missed payments on home equity lines of credit during the third quarter.
The trade group's latest report on late payments for consumer loans said delinquencies on car loans that banks made indirectly through auto dealers also were at the highest levels it had ever recorded.
By contrast, consumers were missing fewer payments on credit cards, the ABA said. A quote from the trade group's economist James Chesen:
While some people are relying on credit cards to meet daily expenses like food and gas, many are being careful not to add new debt.
-- E. Scott Reckard
Photo: Lenders and HUD-certified counselors meet with homeowners at a foreclosure prevention counseling fair at Crenshaw Christian Center in Los Angeles on Dec. 6. Credit: David McNew / Getty Images
In case you were still wondering if the credit crunch is real: A quarterly Federal Reserve survey of senior loan officers found that getting any type of mortgage became tougher during the third quarter.
The survey, conducted in October and released today, tallied up responses from 55 U.S. banks, the large majority of which reported they had tightened their lending standards.
Tightening by category: 70% for prime loans, 90% for nontraditional mortgages and 100% for subprime home loans at the four banks that said they were still writing mortgages for people with poor credit scores. (The nontraditional category includes such products as adjustable-rate mortgages with multiple payment options, interest-only loans, mortgages with limited income verification and loans on properties not occupied by the owners.)
Sinking housing prices took a toll on the availability of home equity lines of credity as well. About 75% of the banks reported having made it harder for borrowers to qualify for revolving HELOCs over the past three months.
About 85% of domestic banks also reported tightening lending standards for commercial real estate loans.
Of course, mortgages were only part of the picture -- nearly 60% of the responding banks told the Fed they had imposed tighter standards on credit card loans, and nearly 65% indicated they made other consumer loans harder to get over the past three months.
-- E. Scott Reckard
I've posted several times about lenders -- notably Washington Mutual -- freezing or reducing HELOCs, or home equity lines of credit. This article indicates that letters are going out right now to notify more borrowers that their lines of credit have been suspended or slashed: "Washington Mutual has slashed or suspended $6 billion in available home equity credit to its customers in an effort to reduce its risk in a flailing housing market."
More: "If they haven't already been notified, WaMu's customers across the country will learn of the change to their credit availability in a letter mailed to them in the next several days. The bank declined to disclose how many customers will be affected."
Analysis: This is why the Federal Reserve's job is difficult right now. On the one hand it is cutting interest rates to make borrowing more attractive. On the other hand it is strongly encouraging banks and lender to improve their balance sheets, which in many cases means: stop making the kind of loans you've been making lately.
There is also a fairness angle here: is it fair for banks to unilaterally reduce credit to even their best borrowers? I would point out, whether it's fair or not, it's not new; banks have always done this. Mark Twain: "A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."
It's raining, folks. Cats and dogs and housing prices are falling from the sky. The banks want their umbrellas back.
Your thoughts? Insights? E-mail story tips to peter.viles@latimes.com.
Hat tip: Miami Meltdown
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