Morgan Stanley Cuts Off Home Equity Lines

Morgan Stanley has told thousands of its home-equity credit clients they can no longer draw on the lines, Bloomberg reports. Most had property values that had fallen, and were frozen to cut back on risk, a source said. A Morgan Stanley spokesman confirmed that “a segment of clients” had been notified of changes, but said it wasn’t out of the ordinary.

“Morgan Stanley periodically reassesses client property values and risk profiles,” the spokesman said. Morgan isn’t alone, either. “All consumer lenders and home-equity lenders are reassessing the environment,” one analyst said. JPMorgan has notified 150,000 customers of changes in their home-equity credit lines since March. “It's evidence that they don't think the economy is going to recover quickly,” said another analyst. (More Morgan Stanley stories.)