Equity

Many homeowners were alarmed in 1991 when Consumer Loan Advocates made a shocking discovery: Forty-seven percent of all adjustable-rate mortgages were calculated incorrectly, costing consumers millions of dollars.Now comes this bombshell from the Lake Bluff, Ill., loan-auditing firm.A recent analysis of 110 home-equity lines of credit found a 74.5 percent error rate, to the tune of about $257 a year per family.If the findings by Consumer Loan Advocates' are accurate, they could point to a major problem, because the number of home-equity loans has soared in recent years.

Some in the industry characterize the practice as business raiding. But the Bank of Baltimore defends its aggressive campaign to persuade customers to transfer their home-equity loan balances to the bank from other institutions and says it's been very effective."

WASHINGTON -- If you own a home and have auto, credit-card and other personal debts outstanding, get ready for the bankers' big pitch of 1991: With the prime rate down to 9 1/2 percent and the Jan. 1 demise of all remaining federal deductions for personal interest, it's home-equity-line time.You've probably seen the ads already. No points! No closing costs! The lowest introductory rates in town! And it's all yours -- up to $100,000 if you need it -- if you'll just sign up for a line of credit this month.

COULD THE MISMATCH between short-term and long-term interest rates change the way millions of Americans tap their home equity for remodeling, college tuition, autos and other big-ticket expenditures? Market forces certainly are pushing consumers in that direction, and there is evidence the shift is under way. You can refinance into a conforming 30-year fixed-rate mortgage and take substantial additional cash out for 5 3/4 percent with little or no closing costs. But a new home-equity credit line - pegged at prime plus 1 percent - would run you 7 1/4 percent to start.

SHOULD YOU pay for your groceries, your restaurant tab, your gas tank fill-up, and your medicine at the drugstore by hocking your house with a Visa card? Would you do it if you got frequent-flier miles thrown in? Consumer advocates don't like the idea, but some major lenders are banking on it: Real estate equity-linked personal credit cards could turn into the next hot trend for U.S. homeowners. The rationale is intriguing. When Congress ended tax deductions for consumer credit in the Tax Reform Act of 1986, some legislators hoped it would discourage high-cost credit card and other personal borrowings.

American homeowners owe nearly $1 trillion on home equity loans and lines of credit, according to SMR Research, and they borrow an additional $100 billion each year through cash-out refinancings. This wave of borrowing has serious repercussions for homeowners' financial health, so this week's column is devoted to dealing with home equity and debt. I've used up all equity in my home to pay off credit card debt, but now my credit card debt has grown again to $40,000. I have $49,000 in a 401(k)

The value of homes continues to slide downward in many areas of the country. And the resulting impact on owners extends far beyond a loss of equity.Many home sellers just can't adjust to the fact that they may have to accept a price that is less than they paid for their home. It's not supposed to be that way. And owners often equate their financial health with the amount of equity they have in their home."The primary purpose of buying a home should be for shelter and the personal benefits of ownership," said Cathy Mims, a Realtor and chairwoman of a California Multiple Listing Service.

Howard school officials are proposing spending $1.5 million this year to begin bringing "technology equity" to county schools by purchasing more computers and software.In fact, a lot of useful work went into a report on this issue that was submitted to the county Board of Education last week.It establishes a minimum standard for the number of computers and types of equipment each school needs to produce computer literate graduates. (For example, it proposes one computer, plus one modem, one color scanner and one CD-ROM, for every 10 students.

THE EQUITY-building party rolls on for most of the nation's homebuyers and owners, even in the face of higher mortgage rates. A comprehensive new statistical study of home values in 121 markets reveals that the typical American home increased in resale value by more than half a percentage point per month during 1999 -- close to 7 percent. Homes in nearly two dozen large markets gained in value at double-digit annual rates, some jumping more than 1 percentage point per month. But can -- or should -- the home appreciation money-machine keep cranking out returns at this pace indefinitely?

A top BT Alex. Brown executive who heads the equity sales and trading division has resigned, sources familiar with the situation said, making him the seventh senior member of the firm to leave after the merger with Bankers Trust Corp. 18 months ago.It is unclear when Bruce H. Brandaleone will leave the Baltimore-based company, but colleagues held a send-off party for him yesterday.Clinton R. Daly, a managing director with the firm, will assume part of Brandaleone's responsibilities, and take over as head of U.S. institutional equity sales, sources familiar with the situation said.