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The housing market seems to be on the right track. The origination of home equity lines of credit (Helocs) hit a five-year high this year as a result of low interest rates, rising home prices, and increasing consumer confidence in the trajectory of the market.  But while it’s a great time to be a homeowner, it might not be a good time to be a would-be homeowner.

In response to the housing market crash, mortgage lending became more rigid than ever, and has yet to rebound. Even Ben Bernanke, former chairman of the Federal Reserve can’t refinance his home mortgage due to strict and irrational credit standards. So, why the abundant confidence on one hand and such caution on the other?

According to Don Frommeyer, CEO of the National Association of Mortgage Brokers, it boils down to risk. “Banks are much more confident lending to those who already have substantial equity in the form of a home,” says Frommeyer. “They’ve been through this before, and they don’t want to risk another meltdown.”

The nature of Helocs is also responsible for the surge. Borrowers don’t often use their Helocs in full, meaning homeowners take portions of the approved line of credit for a specific purchase such as new windows or a college tuition payment. Mortgages – especially second mortgages – on the other hand, are traditionally used to consolidate loans and lower interest rates. The risk for the lender is great, especially because the lender for the first mortgage gets paid first in the event of default.

So what does this mean for the future of the housing market?

“This could have negative long-term consequences,” Frommeyer warns. “If qualified buyers aren’t being approved for first-time mortgages, the market will slow again and home prices will stop rising.”

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