Once upon a time, your home’s equity was the equivalent of an ATM machine. You could walk into any bank and apply to borrow money against the equity of your home. Banks were also flashy in their advertisements, asking people to borrow on their home equity for any reason under the sun. Now it seems that the home equity ATM has switched itself off as though some virus attacked it. The loans to buy the flashy cars, TVs and home improvements are no longer available, and many people cannot just borrow for any purpose anymore. Have these loans suddenly been stopped? No, banks are just more choosy about who they lend to.

Reason to Hold Back

At the height of the real estate bubble, banks were flush with funds and wanted to entice people into taking out further loans on the equity they held against their homes. Flashy advertisements offering second mortgages to people gave a number of reasons why more loans should be taken out, including home improvements, education, and purchase of luxury goods to make their point. Consumers were also happy to take out the loans, because they could live the good life without too much difficulty. Things changed when the real estate market slumped and the recession became evident, as property prices and incomes plummeted, leading to defaults on mortgages. People who had borrowed money as a second mortgage began seeing many difficulties with their finances, as they now had to deal with two payments instead of one. Household incomes started dipping as well, and banks finally decided to pull the plug when unemployment started increasing along with defaults on mortgages.

No More ATMs

With falling prices of properties, people found that the value of their homes had declined as well. While they had already borrowed the money they wanted, they found themselves unable to repay these loans when they came due. Many people got a renegotiated settlement plan from their banks, while others were not so lucky. The people who took out home equity loans are now having to pay back two loans in a time when their incomes have decreased, making their future outlook bleak and discouraging. What happened to the ATM from their home’s equity? It’s completely gone, along with their futures.

High Risks to Lenders

People who borrowed money on their home equity do not realize that these lenders are at risk of losing their entire investment in the case of a foreclosure. Yes, they probably paid higher fees to get the money and may also have kept up their part of the bargain. However, in the event of a foreclosure, it is the primary lender who has the first dibs on any proceeds received from the sale of the property. Under these circumstances, it is natural for the lenders to put the brakes on such loans. Where does that leave the consumer?

As things stand at the moment, it certainly looks like the borrower is left in a difficult cash crunch. They will need to talk to different people, and come up with a suitable action plan to sort out the mess that they have gotten themselves into. Returning the borrowed money is after all the primary objective, in comparison to losing the home.

Oil prices are down currently, saving developing countries from having to borrow money.

Oil prices started moving up just about a year ago up to $147.70 per barrel, after prices had dropped to the mid $20 range. There were a lot of countries who were very happy when the prices started moving up, while other countries were stuck having to borrow money heavily to finance purchase of oil, with Asian countries being the ones who were hit most.

Oil Imports Critical to Asian Economy

Countries besides those located in the Middle East depend heavily on oil imports purchased on the spot. With prices shooting up beyond $140, there was a ripple effect that left many countries reeling for funds, because oil is one commodity that these countries cannot do without. Transport of goods depends on the oil that is imported, and when prices shot up, it left producers of goods with no option than to raise prices of other commodities. The overall effect was a price rise that hit the public and left them borrowing money as well.

Concern in the Middle East

Falling prices will be a concern to producers in the Middle East who were flush with funds when the prices were high. Because the Middle East sits on one-fifth of all oil reserves of the world, they demanded that prices be increased, and even resorted to cutbacks in production to create artificial shortages. Countries like Venezuela and producers in the North Sea created problems for those in the Middle East when this happened. Now that oil prices are again decreasing, the Middle East is facing one financial crisis after another, and there is bound to be increased concern in this matter.

OPEC Refuses to Cut Production

Oil prices are currently down to below $69 a barrel, and the Organization of the Petroleum Exporting Countries (OPEC) has stated that production levels will be held at the current figures with no changes or cuts until their next meeting on December 22, 2009. Producers in the Middle East will no doubt be unhappy with the decision, while oil importers will look to lap up existing reserves in the market at prices that may be better.

Lower Oil Prices May Reduce Countries’ Debts

Countries depending on import of oil for domestic consumption will be happy at the price levels that oil is currently being traded, because lower oil prices will not only help them control the spiraling inflation in their countries, but will also encourage lower loans from international sources. Whether the decrease in the purchase price of oil will result in the reduction of domestic selling prices remains to be seen. However, some countries have taken the step and reduced domestic prices, while others prefer to wait and watch before taking any action. An example of this is that in India, domestic prices of oil still hover around the mark when oil was traded at its highest. But India is not looking to borrow money to pay for oil imports, because they have enough reserves that can help them through this ordeal even if prices rise again. Borrowing money may still be an option for other countries in the region, as well as seeking help from Middle East producers to meet their requirements.