Home Equity Mortgage

National Home Equity Mortgage Association Press Release warns against mortgaging your home to finance stock investment.

WASHINGTON, Dec. 13th. Homeowners should think twice about taking out home equity loans to make stock market or other financial investments, according to the National Home Equity Mortgage Association (NHEMA).

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"Investing in the stock market is a risky proposition, and that risk is especially high if consumers are putting their homes on the line to buy stocks," said NHEMA Chairman Mitch Feinstein. "If the return on the investment isn't high enough to repay the home equity loan, borrowers could end up losing their biggest and most important financial asset: their home."

The share of total mortgage refinancing funds used for stock market and other financial investments increased from less than 2 percent in 1998-1999 to 11 percent in 2001-2002, according to a Federal Reserve Study recently cited by the National Association of Securities Dealers (NASD). The average amount of cashed-out home equity used for investments also increased sharply in the same period, to more than $24,000. Based on concerns about these rising numbers, NASD has warned its members that using home equity for investments may not always be suitable.

NHEMA urges any consumers borrowing against their home equity for stock market or other financial investments to remember:

• If you don't make your payments on your home equity loan, you could lose your house.

• Closing costs on your home equity loan will offset some of the return on your investment.

• Your home is an important part of your investment portfolio; cashing out home equity could actually weaken your asset diversification.

• You might earn higher returns with lower risk by using your home equity to pay off high-interest debt, to finance home improvements that increase the value of your home or to invest in your children's education.

Borrowers who are having trouble repaying home equity loans can get help by contacting their lender or a credit counselling service. Free information is available from the BorrowSmart Public Education Foundation at http://www.borrowsmart.org/.

About NHEMA

NHEMA is the only trade association solely representing the nonprime mortgage lending industry. NHEMA's approximately 250 members account for 80 percent of the more than $340 billion in nonprime mortgage loans originated each year. The association and its members are committed to ensuring that all homeowners have fair and equitable access to credit.

CONTACT: Adam Findeisen of the National Home Equity Mortgage Association, +1-202-466-7391

Web site: http://www.borrowsmart.org/

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