Demos: Refi Boom Could Spell Disaster

The mortgage refinancing boom has resulted in a fiscal crunch for many homeowners, and could spell disaster for millions if home prices plunge, according to Demos, a New York-based public policy organization.Many homeowners are following the dangerous strategy of "depleting their home's equity to pay off a growing mountain of unsecured debt," according to a Demos report titled "A House of Cards: Refinancing the American Dream." Javier Silva, the author of the report, noted that millions of homeowners have refinanced in the past three years to pay off credit card debt and cover living expenses, many of them with "risky" adjustable-rate mortgages tied to the prime interest rate. "Now, with stagnant wage growth and increasing expenses, families are feeling the pinch and spending their home's equity to make ends meet," he said. "If home values bust, many of these homeowners will be devastated." Demos can be found on the Web at http://www.demos-usa.org.