Countrywide Financial Corp. has suspended the home equity credit lines of almost all its Las Vegas customers, including the $60,000 Christopher Whipple says he needed to expand his cell-phone accessories business, Bloomberg News reports.
“I hope this doesn’t break me,” the 35-year-old retailer said. His credit score was 790 out of a possible 850, putting him in the top 40 percent of borrowers. “It’s going to hurt more than I thought.”
Since January, Countrywide, Bank of America Corp., Washington Mutual Inc. and IndyMac Bancorp Inc. have frozen about 600,000 equity credit lines nationwide, said Michael Kratzer, president of a Bankrate Inc.-owned Web site that’s fielding consumer complaints. The lenders are targeting borrowers in cities where property values are falling, including Las Vegas, Chicago and Los Angeles, he said.
Frozen credit and real estate declines are putting a chill on spending and hurting the economy. In February, taxable sales in Clark County, Nevada, which includes Las Vegas, fell 3.1 percent from a year earlier, dropping 13 percent at furniture stores and 6 percent for durable-goods wholesalers. In the same month, as it became harder to borrow money across the U.S., consumer spending rose at the slowest pace in more than a year.
“It’s really putting borrowers in a panic,” said Kratzer, president of feedisclosure.com in North Palm Beach, Florida. The amount of credit frozen nationally may be $6 billion, based on an assumption that the 600,000 borrowers each had $10,000 available, he said.
