Morgan Stanley (MS) Freezes Home-Equity Loans, Consumer Credit Continues to Tighten

In yet another sign of tightening credit choking off consumer spending, Morgan Stanley (MS) is freezing its clients’ home-equity lines of credit (HELOC). As housing prices continue to crater, MS can no longer be sure of the value of the primary asset its clients use as collateral for these loans. A representative for Morgan Stanley said:

Morgan Stanley periodically reassesses client property values and risk profiles. A segment of clients was recently notified of a change in the status of their home- equity line of credit, or HELOC, due to a change in the value of their property and/or their credit profile.

Morgan Stanley refused to disclose the size of the segment of customers that will be be affected by the move.

This move makes sense for Morgan Stanley–who wants to throw money away?–but it’s another example of consumer credit tightening. This will ultimately make it harder for consumer spending to recover–and consumers still account for 72% of the economy.

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