| The average amount of equity American homeowners have in their houses has been seriously compromised due to low-down mortgages and home-equity loans according to a study prepared by Freddie Mac for the Consumer Federation of America and reported in USA Today.
Despite prosperity and rising home values, average home equity fell 2 percent from 1989 to 1999, The biggest equity decrease was for Hispanic homeowners, whose average home equity fell 20 percent. Some Americans have bucked the trend. Average home equity has grown 12 percent for black families in the past decade and 6 percent for lower-income families, according to Freddie Mac’s analysis of Census Bureau data. The study did not explain the reasons for differences among ethnic groups.
The good news is that both home ownership and home equity have grown among lower-income families,” commented Stephen Brobeck, CFA executive director. But he said he is concerned about the larger trend.
“Historically, home equity has been the most effective way for the middle class to build wealth,” he said. On average, it represents 50 percent of household net worth, according to Federal Reserve research.
The study cites two main reasons for the drain — increased borrowing against home equity and the proliferation of low-down mortgages.
Ironically, the availability of low-down mortgages has helped make home ownership a reality for many Americans, especially low-income and minority families.
And home-equity loans let many consumers swap high-interest-rate credit card debt for lower-rate loans. The interest is generally tax-deductible. | 
